Seasonal Flexibility in the Northwest European Gas Market: An Outlook for 2015 and 2020

This paper examines whether the Northwest Europe has sufficient supply capacity to physically meet the cumulative gas demand over a severe winter in 2020. It is argued that the current outlook does not give rise to major concerns.

Two annual demand scenario’s which span the wide range of uncertainty in future projections and provide data per country and per sector have been used to estimate the volume requirements in a 1-in-20 winter. In the absence of academically accepted guidelines to quantify demand for such a winter, an own approach has been developed.

For the Baseline Scenario in 2020, it is concluded that supply options in addition to storage currently under construction will need to be developed, but LNG may also have to play a role as a potential source for seasonal supply. The outlook is not alarming, but at least some additional contribution from planned storage expansions and/or planned new storages will need to materialise if the balance is to shift away from possible discomfort in a severe winter. However, it is noted that the small seasonal differences in current forward prices for gas do not contribute positively to the investment climate for new storage, even though these only reflect the short-term market conditions and not the longer-term demand.

Under the low demand New Policy Scenario, there appear to be adequate options for winter supplies in a 1-in-20 winter up to 2020, even if further investments beyond those which have been assumed to be committed are not realised.

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