Lecture 2 on the European Natural Gas Market Auke Lont Member of Supervisory Board Gasunie

World Energy Demand Source: World Energy Outlook 2007 IEA

European gas supply

Future European gas supply creating concerns Security of supply - price of energy - environment

Gas supplies to Western Europe (2020)

Existing U/C & planned Speculative GALSI MEDGAZ Green Stream Baltic Pipe BBL Britpipe

MCM/dag Load Duration Curve NW-Europe Seasonal Storages Supply Production Groningen Gas day Demand profile Peak supply Natural gas demand depends strongly on weather Swingratio ’95-’04 Belgium Denemark France Germany Netherlands United Kingdom 29% 36% 47% 36% 34% Demand ’05 (BCM) winter Baseload Gasvraag summer Baseload demand Working gas volume

Pricing of natural gas  Market value principle – interfuel competition –’fixed in volume, flexible in price’ –High investment cost pr unit of transportation  Take or pay contracts as basis for development of markets – ’long term marriage’ –Suppliers investing in platforms and transmission pipelines –Gas companies investing in distribution lines and storage  Gas-to-gas competition

Future of European gas  EU deregulation and 2020 agenda –Unbundling –Carbon price –Security of supply –renewables  Industry consolidation  New pipelines –Nordstream –Southstream –Nabucco  LNG  CCS (carbon capture and storage)

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