Anouk Honoré: European Gas Demand, supply and pricing: cycles, seasons and the impact of LNG price arbitrage

Natural gas is expected to be the fastest growing fuel consumed in Western Europe in the coming decades. Much of the growth in demand will come from the increasing use of gas in power generation. Europe holds less than 4% of the world’s natural gas reserves and the region is expected to become increasingly dependent on gas imports. With the increasing distances from gas sources to gas markets, LNG could become a more important source of imports for some European countries. Indeed, Europe is expected to be a significant growth market for LNG over the coming decade. The main interest of this work will be to question the importance of LNG in Europe in the near future, taking into account the arbitrage opportunities with the North American market.

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Anouk Honoré: Gas and Power in Southern Europe: Iberian Peninsula and Italy

The Spanish energy sector has undergone many changes in the recent years. The first part of the paper will look at the demand for natural gas in the Spanish market. One of the most challenging issues is that Spain's demand for energy has grown rapidly and that this growth shows no sign of abating. Spain's indigenous energy resources are limited and unlikely to increase significantly, with the exception of some form of renewable energy production, in particular wind. The growth in the use of natural gas in power generation led to increased security of supply concerns compared to hydroelectricity, but also to reduced environmental impacts compared to coal generation. Spain is the fastest growing gas market in Europe, and the energy industry has coped relatively well in satisfying the rapidly increasing demand for natural gas so far.

The second part will look at the energy supply to Spain. The weak cross-border gas and electricity interconnections and low electricity trade compared to total demand lead to a situation not dissimilar to that of an island. Spain is the only market in Europe where LNG is a price marker, and it is a particular interest to have a look at this topic to understand the risks and opportunities a growing dependence on LNG could have in the country.

The third part of the study will consider possible scenarios for the Spanish market for the next decade. After considering demand and supply balances, we will look at the liberalisation process of its markets (ahead of EU directives?), at the probable entrance of new players into the energy market competing with the incumbents and on the consequences of these developments for the Spanish market and for the different players in this market.

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