thing with Europe facing a global market short supply of LNG.
Circumstance Demands a Strategist At Global Energy Advisory we have long cautioned that as a European power player you have to watch and balance the market of your assets against the really big picture of global commodity flow. This essentially means: watch any move that China makes within the dynamics of related global markets. China has its 12th
five year plan which has
made gas at the cornerstone of its energy policy with a target of 8.6% of its primary energy use. This is not just 8.6% of its power production it’s the full energy use by the citizens. In its power market alone, within seven years China will have replicated a power system the size of the United States and Japan combined. China is desperately trying to develop shale gas reserves, and we wish them well with that. But in the short term, we see China coming to the global LNG market to source gas, at a time when additional global liquefaction production is delayed and the market is short (sometime between 2015 and 2017). This uncomfortable position could persist for a number of years, so at some point European power producers (and consumers) could be affected. There is some hope that the US could release shale gas through the export of LNG (Sabine Pass has approval) but this will not appear in time or on the scale to avert the problem. In our White Paper for the UK’s Energy and Climate Change Committee on the 25th 20092
February , we highlighted a global short supply
of LNG as a potential risk. So how does the European power market
position its assets to protect (that is risk manage) a potential scenario of a global short position on gas? We have modelled this market and understand the risk to be there, as do others. There is much discussion of European power capacity markets supporting the grid to manage intermittent generation flow – but what if we have very expensive gas generation providing this service? What will it do to the economics of despatch? It doesn’t take too many volatile half hours
to cause a large loss to a trading book, so European power producers could have the potential to significantly increase power and gas prices by their actions. No doubt, if losses occurred, the higher costs would be passed through immediately. As an Industry
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80 |
Page 81 |
Page 82 |
Page 83 |
Page 84 |
Page 85 |
Page 86 |
Page 87 |
Page 88 |
Page 89 |
Page 90 |
Page 91 |
Page 92 |
Page 93 |
Page 94 |
Page 95 |
Page 96