Analyst Alexander Frolov — why the demand for Russian natural gas in Europe will only grow
Photo: lime/Alex Maishev
The past decade in Europe was a time of great hope for natural gas. Respected international organizations confidently predicted the imminent explosive growth in consumption of blue fuel in EU. Background was obvious. A growing economy needed more power, though it was planned to gradually abandon coal and oil in power generation. And what fuel meets the highest environmental requirements and available in sufficient volumes in the market? Of course, gas.
Began the rapid construction of gas power plants. Assessment WindEurope, of the 186 GW operating today in the EU “methane” stations since 2000, was commissioned 93,5 GW.
Given the General decline of gas production in the countries of the EU before the world suppliers of wonderful opportunities.
Our country, of course, offered his services. This met with understanding from the business, which, for example, willingly took part in the implementation of the “Nord stream”. However, European politicians insisted on the diversification of imports. There was talk about the imminent advent of cheap liquefied natural gas (LNG) from Qatar. Began active construction of LNG receiving terminals. Looking ahead, we note that now the place of Qatar in the forecasts of cheap methane was taken by the United States, and 75% of LNG terminals in Europe are idle.
But now let us return to the electric power industry.
In 2011, the accident at the Japanese NPP “Fukushima-1”. This not only strengthened the position of critics of nuclear energy worldwide, but also led to major changes in the European energy mix. Germany has reduced the installed capacity of its nuclear power plants by almost half. However, the main consequence of the accident at the “Fukushima” is not about nuclear energy. It concerned natural gas.
On the background of anti-nuclear hysteria has occurred the redistribution of financial flows in favor of renewable energy sources (RES). Due to certain specifics of renewable energy growth of renewable generation has led to a decrease in load gas-fired power plants. It got to the point that some high-efficiency gas units were not used. This, in turn, has led to enormous financial difficulties of major European companies invested in the construction of gas-fired power plants. After all, if the station is not working, it is not profitable. In Germany, for example, had to close part just commissioned stations.
In General, Europe’s demand for natural gas has decreased significantly. The situation was aggravated by the fact that over the past six years, the volume of electricity production in the EU is not only growing, but is slightly decreased.
The situation began to change in 2016. According to the International energy Agency (IEA), in 2016 in Europe (OECD) was made about 3443,5 TWh (0.9% more than in 2015). The highest growth was demonstrated by fossil fuels. If in November 2016, this segment had growth of 1.9% for 11 months of 2015, while in December the gap (yoy) increased to 2.6%. If in 2015 the fossil was 46.3% of all power generated in 2016, their share was 47.1%.
These figures are a reflection of rising demand for natural gas in Europe. According to the IEA, demand for natural gas in Europe (OECD) increased in 2016 by 6.8%. While the actual stagnation in power generation will not go away. It is a clear reflection of the economic challenges for several years fighting the EU.
And ahead of the European power industry will see interesting and because of hard times. It is expected that in the next ten years the EU will begin to abandon coal. This will allow to increase the share of renewable energy and natural gas in the energy mix. It is likely that the European Union is a roundabout way come to the “age of gas”.
And we come to the most topical issue for our country. To the question — where Europe will take the blue fuel. To answer this, we need to note one important thing — last year there was a rehearsal of a price war in the gas market. Prices for this energy source has been minimal, and we could observe the behavior of producers and consumers in a tough economic environment. So, we have seen that LNG from the United States prefers South America to Europe that Norway is reeling, and Russia increased their supplies. While it is now clear that “Gazprom” has finished the year with a significant profit. In contrast, by the way, colleagues from UK and Norway.
Rehearsal of a price war showed that in fact Europe is not as big as it seems, the choice of suppliers willing to sell gas at competitive prices and in sufficient quantities. And in fact, such a supplier one.
The author is Deputy Director General of the national energy Institute