International Gas Prices – March 5 , 2015

NBP: Under temporary pressure

NBP and CoalThe NBP price averaged €23.4/MWh ($7.8/MBtu) in February, up nearly 14% compared to January. Two factors exerted upward pressure. First, taking the NBP to €25.7/MWh on Feb. 12, was the Dutch debate over Groningen and its level of production (66% of the country’s total) for 2015 and 2016. The latter was cut to 39.4 bcm from the initial target of 42.5 bcm, like in 2014. Proposals of 35 and 30 bcm were also heard. It was agreed to set the level at 16.5 bcm for first half 2015. Secondly, the negotiations between Russia and Ukraine in late February, with threats of cutting off gas deliveries, also gave cause for concern. The fact that a trilateral meeting took place and a prepayment was made in early March, even if it was small ($15 M for about 50bcm), slightly alleviated market pressure. In early March, the pressure lifted slightly and prices fell to €22.9 /MWh ($7.5/MBtu), 2% lower than in January. The market anticipated an average summer price of €21.6/MWh ($7/MBtu).

MEDIUM AND LONG TERM NATURAL GAS OUTLOOK

Natural gas will play a growing contribution in both OECD and emerging markets to meet the economic, environmental and security challenges of the world energy system. However, the future expansion of natural gas should not be taken for granted. Increased competition with coal in the power sector will need to be addressed while maintaining a gas price at a level compatible with the development of large capital-intensive projects. Only by resolving this conundrum can natural gas fully live up to expectations.

Gas demand growth is expected to remain strong to 2035, under the impulsion of the Middle East and China, where natural gas is making inroads in all consuming sectors

Natural gas demand➢ Energy efficiency gains will slow down both global primary energy and gas demand growths relative to the previous decade
➢ Global primary energy demand will grow by 1.3% per year and natural gas demand by 1.8% per year to 2035. Natural gas will increase its share in the global energy mix from 21% in 2013 to near 24%
in 2035
➢ Approximately 75% of the projected growth will come from emerging markets, driven by the economic growth and the displacement of oil in every main consuming sector
➢ Natural  gas  should  also  expand  in  the  power  sector  –  and,  to  a  lesser  extent,  in  the transportation sector – in OECD countries under the incentive of environmental & climate policies
➢ Asia-Oceania and the Middle-East will drive demand, accounting respectively for 42% and 24% of global growth. Asia-Oceania will become the largest consuming area post-2020, led by China.
➢ In China, the future growth of natural gas will be driven by the implementation of an energy and environmental policy aiming to shift away from coal to cleaner fuels in the long term

CEDIGAZ’s Monthly LNG Trade Bulletin of February 2015

Asia: overall year-on-year stagnation amid weaker growth in China

LNG importsIn Asia, the volume of LNG imported by the three largest consumers – Japan, South Korea and China – has stagnated overall, from 145.4 million tons in 2013 to 145.6 million tons in 2014. Japan imported 88.5 million tons in 2014 versus 87.5 million tons in the previous year, while South Korean imports decreased by 6.8% down to 37.2 million tons due to the restart of some nuclear plants, strong competition from coal and mild temperatures. Chinese imports growth has markedly decelerated to 10.4% versus 23% in 2013 and 20.3% in 2012.