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European gas outlook
The unexpected weakness of EU gas demand has important implications both for the region's suppliers, in particular Russia, and for EU energy policy.
For the EU, low levels of gas demand strengthen its security of gas supply, but the long-term nature of gas contracts with foreign suppliers create inertia in the market, which will slow the penetration of LNG and thus the diversification of supply sources.
In addition, the likely weakness of gas prices calls into question the economic viability of expensive projects to bring new sources of gas supply into Europe, such as the TransAnatolian Pipeline.
For Russia, the lack of EU gas demand is of major concern, and a key reason why it has been pursuing ways to export gas eastwards to China and to LNG plant that can reach multiple markets.
Russia is in fact forecasting additional growth in annual exports to Europe. Gazprom's share of the Russian domestic gas market has fallen in recent years as independent producers have increased output and the company's domestic market share is close to falling below 50% for the first time.
Domestic Russian gas demand is forecast to rise at a very low rate in coming years and come close to stagnation for the remainder of the decade.
Gas output, meanwhile, is expected to show steady growth.
The increase from new developments and existing excess capacity should more than compensate for the extra demand generated by recent agreements to build pipelines to export gas to China, which are expected online before the end of the decade.
This situation leaves little choice for Gazprom. As the only company allowed to export gas, it will become more dependent on exports and less dependent on its domestic markets.
And despite its plans to build LNG plant and export to China, Europe remains by far its largest and most important market -- one where the prospects for demand growth are poor and which has an avowed policy to reducing its imports of Russian gas.
As a result, competition between LNG and pipeline supplies will intensify and LNG's market share is likely to increase.
But in the short-term Russian gas imports will rise, a situation at odds with EU energy policy.
Moreover, LNG uptake will be limited by the long-term nature of many European customers' contracts with Gazprom, many of which extend well beyond 2020, by infrastructural constraints, and -- although it is loath to do so -- expectations of greater pricing flexibility on Gazprom's part.
It is a complex balancing act. LNG is likely to take market share from pipeline supply, but European gas supply will remain dominated by pipeline imports, especially from Russia.
Despite investment in reverse flow pipelines and new LNG importing terminals, Russia remains Europe's single largest gas supplier, one with growing volumes of gas for export in coming years.
There are, of course, many uncertainties, not least the possibility that rising US domestic gas demand undermines the profitability of US LNG exports, which has already been severely reduced by the fall in Asian spot LNG prices.
Nonetheless, the current outlook suggests that Russia will become more dependent on the EU as a customer than the EU is on it as a supplier.