Energy Presentation27 GasDemandinEurope AHonore 2005

OXFORD INSTITUTE FOR ENERGY STUDIES
Gas Demand in Europe:

The role of the power sector
Oxford Institute for Energy Studies
Natural Gas Research Programme
Anouk Honore
[email protected]
Energy Markets: Fundamental Changes or Business as Usual?
Energy Risk Management Seminar
CASS Business School - 28 June 2005
OIES Natural Gas Research Programme

WHO WE ARE: a gas research programme located at
an independent academic research institute in
Oxford*, specialising in conventional energy
research
WHO WE ARE NOT:
z
consultants
sellers of exclusive, high price business reports
WHAT WE PRODUCE: independent research on

national and international gas issues
Information about our programme and its
publications can be found on our website:
http://www.oxfordenergy.org/gasprog.shtml
*Oxford Institute for Energy Studies is an educational charity
Research Programme: published work

z
A Global LNG Market: is it likely and if so, when?

James T Jensen
Natural Gas and the Producer/Consumer Dialogue,

Jonathan Stern (co-authored with Coby van der Linde
for the IEF)
Asian LNG Trade and Gas Market Reform:

implications for gas and power customers, Jeffrey Skeer
Argentine 2004 Gas Crisis, Anouk Honore
Fraternal Friction or Fraternal Fiction? The Gas Factor

in Russian-Belarusian Relations, Chloe Bruce
All downloadable from the website
3
Research Programme: work in progress

z
Gas Demand in Europe by 2015 the importance of the power sector,

Anouk Honore
Gas Price Formation in the UK: markets and insecurity of Supply, Philip
Wright
The Future of Russian Gas and Gazprom, Jonathan Stern
The German Path to Gas Liberalisation: something special? Heiko
Lohmann
Entry-Exit Transmission Pricing Around Notional Hubs: Can It Deliver A
Pan-European Wholesale Market In Gas? Paul Hunt
Will There Be An Effective Organisation of Gas Exporting Countries?
Regional Groupings and Market Power. Hadi Hallouche
The Interconnector Pipeline: a key link in Europes gas network. Mark
Futyan
European Gas Demand: outline

z
Why gas demand ?
OIES on-going research

Historical data
Non-power sector
Power sector
Assumptions
z Probable / possible scenarios (2005-2010)
z High and low case scenarios (2010-2015)
Conclusions
Why Gas Demand ?

z
A very under-researched subject in comparison to

supply
Scenarios tend to focus on the gap between

supply and demand 20-25 years into the future
and are very seldom price sensitive
Statements about demand increasing by 1.53%/year up to 2030 tell us very little about the
short/medium term future
We are not convinced by the forecasts of gas
demand shown at conferences
6
European* Gas Demand Projections to 2030 (IEA)

* Europe 25
Source: WEO 2004
70% of incremental demand is for Power

7
IEA and other projections

IEA = 620 bcm in 2015 for EU25
Power: 220 bcm - Non-Power: 400 bcm
z Eurogas = 450 mtoe for 2015 for EU15
Power = 120 mtoe Non-Power: 330 mtoe
z Cedigaz: 458 474 bcm for 2010 for 7 major
markets
z Consultants eg: Global Insight
xxx1 bcm in 2015 for 7 major markets
z
Assumptions / models are not known

Very difficult to compare time series because of
different geographical grouping and different
definitions of sectors
1: This information is NOT in the public domain, which is why it has been erased.
European Gas Demand: OIES Research

z
The study: Total 34 countries

In detail: 7 major markets (83%* of total EU25 gas demand):
Belgium, France, Germany, Italy, the Netherlands, Spain and
the UK
PLUS: Hungary, Poland, Romania, Turkey
AND: Austria, Czech Republic, Denmark, Finland, Slovak
Republic
=>16 MARKETS = 93%* of European gas demand

z
What follows are the preliminary conclusions of

our on-going study
* These shares will remain the same (or even increase a little) by 2015
9
bcm
500
Others
450
Slovak Republic
400
Austria
350
Czech Republic
Hungary
300
Poland
250
Belgium
200
Spain
France
150
Netherlands
100
Italy
Germany
50
United Kingdom
03
20
01
20
99
19
97
19
95
19
93
19
91
19
89
19
87
19
85
19
Gas Demand in EU 15 + 10
from 1985 to 2003
Source: IEA
10
bcm
400
Others
350
300
Agriculture
250
Energy
200
Power
150
Industry
100
50
Residential and
Commercial
01
Source: IEA
20
99
19
97
19
95
19
93
19
91
19
89
19
87
19
85
19
Gas Demand by Sector in 7 major markets

(1985 2002)
11
Sectoral Demand Changes in 7 major markets

Source: IEA
(%)
POWER
Residential /
Commercial
Industry
TOTAL
1990
-02
2000
-02
1990
-02
2000
-02
1990
-02
2000
-02
1990
-02
2000
-02
2000
-03
Belgium
140
- 0.3
44
4.8
61
- 0.3
65
1.6
- 1.3
France
664
41
38
0.4
34
47
10
Germany
15
16.7
65
4.7
4.6
- 3.5
30
3.4
Italy
125
-1
35
20
- 0.5
49
- 0.4
8.7
NL
61
9.6
7.5
- 13
- 7.2
15
2.4
Spain
760
67.6
499
28
186
12
277
23.2
39
UK
1278
-1
28.6
10.9
-8
71.4
- 1.8
-1
EU7
153
6.9
39
2.8
21.2
- 0.9
49.6
6.7
12
Electricity Generated by Gas

in 7 major markets - 2002 vs. 1990
Source: IEA
TWh
% of total
generation
TWH
% of total
generation
Average
annual %
change
1990-2002
Belgium
5.4
7.7
17.8
22
10.4
France
3.0
0.7
17.1
3.1
15.5
Germany
40.5
7.4
55.9
9.6
2.7
Italy
39.7
18.6
108.7
39.4
8.8
NL
36.7
50.9
59
61.3
Spain
1.5
32.4
13.4
29.1
1.6
150.2
39.3
32.8
1990
UK
2002
13
Non-Power
Non
-Power Sector
z
No
outlook/scenario/forecast
has
anything
interesting to say about future growth of residential,

commercial and industrial gas demand (except in
Spain)
z
Everybody sees, non-power demand increasing by
0.8-1% per annum over the next 25 years
Individual countries in southern Europe (Portugal,

Greece) may grow faster but do not affect the
European total
14
Power Sector
Not saying the models are not correct, but we do
not know their assumptions. We chose a different
approach: bottom-up
zQuestion
we ask: Do we currently see the power

station construction to support projected levels of
gas demand ?
zMethodology:
Look at gas-fired power plants

projects in Europe, at different stage of
development, and convert MW of capacity into
BCM of gas demand
Key questions for the power sector: how much,
where and by when ?
15
Gas Demand for the Power Sector:

Assumptions
z
Construction lead-time: 4/5 years from idea

to power plant running at full capacity
Load-factors: base / middle or peak

load
Efficiencies
Probability of actually being built

16
2005 --2010:
2010: TWO Scenarios
1st scenario: PROBABLE SCENARIO

Plants recently operational + plants under
construction => most probable
2nd scenario: POSSIBLE SCENARIO

Probable scenario + plants with administrative
consent
17
What About 2010 2015 ?

z
Many factors can influence the decision to invest

in gas-fired generation
z
z
z
Environmental regulations (ETS LCPD ...)

Prices (high oil-linked prices)
Economical and political incentives (renewables, clean
coal technologies?)
Nuclear phase-out
Again TWO scenarios: HIGH and LOW case

These measures may produce a radically different
demand outcome but not before 2015 ?
18
First Results of the Study /1

z
Increase in gas demand is highly sensitive to the

development of gas-fired generation in two
countries: Spain and Italy
If any significant numbers of power plants in

Spain and Italy are not built, increases in gas
demand will be correspondingly reduced
Note the importance of load factor assumptions

(For 2010 gas demand: difference between high
and low load factors is 40 Bcm for most likely
outcome, and 60 Bcm for possible outcome)
19
First Results of the Study /2

z
Before 2010, and possibly up to 2015, European

gas demand (especially in north west Europe) will
not increase as quickly as generally believed
because of slow power generation growth
Gas demand by 2010/2015: impact of the UK gas

bubble ? Only lower gas prices up to 2015 would
lead to huge increase in gas demand
By 2015, large numbers of new CCGTs will not be

in operation, although construction may have
commenced, despite of EU ETS, LCPD or the
possibility of nuclear phase-out
20
The final report:

Gas Demand in Europe: the importance of the power sector
will be published in Autumn 2005 on the OIES web site:
www.oxfordenergy.org
Comments or questions are welcome, please contact the author:
Anouk Honore, Research Fellow
Natural Gas Programme, Oxford Institute for Energy Studies
57 Woodstock Road - Oxford OX2 6FA - UK
Tel: +44 (0) 1865 889 132 - Fax: +44 (0) 1865 310 527
Email: [email protected]
OIES Gas Programme Web Page: www.oxfordenergy.org/gasprog.shtml
21

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OXFORD INSTITUTE FOR ENERGY STUDIES

Gas Demand in Europe:

OXFORD INSTITUTE FOR ENERGY STUDIES

OIES Natural Gas Research Programme

sellers of exclusive, high price business reports

WHAT WE PRODUCE: independent research on

OXFORD INSTITUTE FOR ENERGY STUDIES

Research Programme: published work

A Global LNG Market: is it likely and if so, when?

Natural Gas and the Producer/Consumer Dialogue,

Asian LNG Trade and Gas Market Reform:

Argentine 2004 Gas Crisis, Anouk Honore

Fraternal Friction or Fraternal Fiction? The Gas Factor

OXFORD INSTITUTE FOR ENERGY STUDIES

Research Programme: work in progress

Gas Demand in Europe by 2015 the importance of the power sector,

OXFORD INSTITUTE FOR ENERGY STUDIES

European Gas Demand: outline

Why gas demand ?

OIES on-going research

OXFORD INSTITUTE FOR ENERGY STUDIES

Why Gas Demand ?

A very under-researched subject in comparison to

Scenarios tend to focus on the gap between

OXFORD INSTITUTE FOR ENERGY STUDIES

European* Gas Demand Projections to 2030 (IEA)

70% of incremental demand is for Power

OXFORD INSTITUTE FOR ENERGY STUDIES

IEA and other projections

Assumptions / models are not known

OXFORD INSTITUTE FOR ENERGY STUDIES

European Gas Demand: OIES Research

The study: Total 34 countries

=>16 MARKETS = 93%* of European gas demand

What follows are the preliminary conclusions of

OXFORD INSTITUTE FOR ENERGY STUDIES

OXFORD INSTITUTE FOR ENERGY STUDIES

Gas Demand by Sector in 7 major markets

OXFORD INSTITUTE FOR ENERGY STUDIES

Sectoral Demand Changes in 7 major markets

OXFORD INSTITUTE FOR ENERGY STUDIES

Electricity Generated by Gas

OXFORD INSTITUTE FOR ENERGY STUDIES

interesting to say about future growth of residential,

Everybody sees, non-power demand increasing by

0.8-1% per annum over the next 25 years

Individual countries in southern Europe (Portugal,

OXFORD INSTITUTE FOR ENERGY STUDIES

we ask: Do we currently see the power

Look at gas-fired power plants

OXFORD INSTITUTE FOR ENERGY STUDIES

Gas Demand for the Power Sector:

Construction lead-time: 4/5 years from idea

Load-factors: base / middle or peak

Probability of actually being built

OXFORD INSTITUTE FOR ENERGY STUDIES

1st scenario: PROBABLE SCENARIO

2nd scenario: POSSIBLE SCENARIO

OXFORD INSTITUTE FOR ENERGY STUDIES