Supply and Demand Balance
in Europe
Sergei Komlev
Head of Contract Structuring and Price Formation Directorate,
Gazprom Export
IBC Working Committee “Energy”
St.Petersburg
May 27, 2016
Gas Consumption in Europe, 2011-2015
Monthly Gas Consumption
In Q1 2016 gas consumption was below multiyear averages, but
higher the record low level of 2014
2
Major Factors Affecting Gas Consumption in Europe Q1 2016
Q1 2016/Q1 2015
1.Favorable weather conditions
(cold and long winter, hot
summer)
2. Economic recovery
3. Use of gas in power generation
Total consumption
-2.0%
3
Weather Factor
Weather Index for Q1 2016 in Relation to the Average Value
In the 1st quarter 2016 weather index in Europe was lower
than both the average historical level, and the level of the
same period last year, which has an overall negative effect
on gas consumption
The calculation is made by "Gazprom export" on the basis of data about the weather conditions in more than 130 areas of various
European countries.
A reading above 100% reflects the favorable weather conditions (cold winters, hot summers) for the growth of gas consumption.
Lower values represent bad weather for gas consumption.
4
Economic Activity, YoY 2011-2015
From 2015 power demand in the European countries
grew at rate of 1.1%. This corresponds to industrial
production index growth. Industrial Confidence Index
revealing company expectations stayed in the negative
territory since the mid of 2011. It was lower by -3.7% in
Q1 2016 as opposed to -3.0% in Q1 2015.
Sources: Bloomberg, ENTSOE
• ЕU27
• ** Survey of industrial sector conducted by European Commission. Difference between the respondents with positive and
negative expectations on the industry development, in percentage terms with seasonal adjustment.
*** EU15 countries, adjusted for working days without construction
5
Demand for Gas in Power Generation
Demand for Gas in Power Generation in the European Far Abroad
(bcm)
Q1 2015
Q1 2016
∆, bcm
∆, %
Total gas consumption
175.2
171.8
-3.4
-2.0%
Gas consumption in power
generation
39.5
43.1
3.6
9.2%
Share of power generation in gas
consumption
22.5%
Gas consumption in other sectors
135.8
25.1%
128.7
2.6 pp
-7.1
-5.2%
In Q1 2016 compared to Q1 2015 demand for gas in power generation
in European Far Abroad countries was higher by 9.2% at the
background of total gas consumption contraction by 2.0%.
Power generation sector share increased by 2.6 pp to 25.1% of the
demand in Q1 2016.
Sources: Eurostat, International energy agency (IEA), ENTSOG, IHS, PIRA, National Statistical Agencies as of April
2016
6
Share of Gas in Power Generation
from Fossil Fuels in the UK, 2012-2016
Carbon tax in UK and reduction of NBP prices made gas more competitive in power generation. On
January 2016 share of gas in electricity generation among fossil fuels reached 60% hitting a record for
this part of the year
Source: Department of Energy & Climate Change of the UK
7
Short-Term Supply and Demand Trends in Europe
Consumption, Indigenous Production, Imports, Exports and Storages in
European Far Abroad countries
(bcm)
Q1 2015
Q1 2016
∆, bcm
∆, %
175.2
171.8
-3.4
-2.0%
Indigenous production*
73.5
72.3
-1.2
-1.6%
Imports
59.1
69.1
10.0
17.0%
Net UGS withdrawals/injections**
46.3
36.6
-9.7
-20.8%
Reverse to Ukraine
3.7
2.7
-1.0
-26.9%
LNG reexports
0.6
0.3
-0.3
-51.8%
For reference: net imports***
54.8
66.1
11.3
20.7%
Consumption
Gas consumption in Europe decreased by 3.4 bcm or by 2.0% in Q1 2016 compared to Q1 2015. On the supply side
indigenous production decreased by 1.6% YoY down to 72.3 bcm.
Natural gas imports to European Far Abroad countries increased in Q1 2016 by 17.0% YoY up to 69.1 bcm.
Withdrawals out of UGS were 36.6 bcm in Q1 2016. There contribution to market available volumes of gas was down
by 9.7 bcm (-20.8%) compared to Q1 2015.
The reverse gas deliveries to Ukraine contracted to 2.7 bcm in Q1 2016 from 3.7 bcm in Q1 2015. The volume of
LNG re-exports also decreased from 0.6 bcm in Q1 2015 to 0.3 bcm in Q1 2016.
As a result, Far Abroad net imports increased in Q1 2016 by 11.3 bcm or 20.7% comparing to Q1 2015.
* Indigenous production includes Norway.
** Positive value means that withdrawals exceed injections for the period and vice versa.
*** Net Imports = Imports – Reverse – Reexports
Sources: Eurostat, IEA, ENTSOG, PIRA, National Statistical Agencies as of April 2016.
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Deliveries by Major Suppliers in 2015
Deliveries by Major Exporters
(bcm)
Q1 2015
Q1 2016
∆, bcm
∆, %
Gazprom PJSC
34.4
44.4
9.9
28.9%
Algeria (incl. LNG)
7.9
9.4
1.5
19.2%
Qatar
7.6
7.7
0.1
0.6%
Nigeria
2.1
2.5
0.4
16.7%
Iran
2.2
2.2
-0.06
-2.8%
Deliveries by Major Indigenous Producers
(bcm)
Q1 2015
Q1 2016
∆, bcm
∆, %
Norway*
33.6
34.9
1.3
3.9%
Netherlands
17.6
14.5
-3.1
-17.6%
United Kingdom
11.2
12.2
1.0
8.8%
* Including pipeline and LNG deliveries from Norway to the European market, but not LNG to Asia and America
Sources: Eurostat, IEA, ENTSOG, Bloomberg, PIRA, National Statistical Agencies as of April 2016.
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European Gas Storage - 1
Gas Storage Level, bcm
By the end of Q1 2016 gas volumes in UGSs were higher compared to Q1 2015 by 7.6 bcm, but
lower than in Q1 2014
Source: GIE data as of April 2016
10
European Gas Storage – 2
Gas Storage Fullness, % of Capacity
By the end of Q1 2016 UGS fullness was close to the
five-year average, surpassing the level of Q1 2015 by
7.7 pp. As of March 31, 2016 the UGSs were filled by
33.7%.
Source: GIE data as of April 2016
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LNG Deliveries to Europe
LNG Import Volumes, 2011-2015 (Accumulated Value)
By the end of Q1 2016 LNG imports to Europe were 9.5%
higher compared to Q1 2015, but still much lower
compared to the record levels of 2011.
Source: Bloomberg
12
LNG Deliveries to Europe by Quarter, 2014-2016
2014: 51.8 bcm
Source: Bloomberg
2015: 55.3 bcm
13
LNG Deliveries to Europe in Q1 2016
LNG Deliveries to Europe by Country
Q1 2015
Q1 2016
∆, bcm
∆, %
Qatar
7.6
7.7
0.1
0.6%
Algeria
2.6
4.2
1.6
57.6%
Nigeria
2.1
2.5
0.4
16.7%
Norway
1.0
0.7
-0.3
-22.9%
Trinidad and Tobago
0.6
0.6
0.01
3.0%
Peru
0.5
0.3
-0.2
-48.4%
USA
0.0
0.1
0.1
-
Yemen
0.1
0.0
-0.1
-100.0%
Oman
0.1
0.0
-0.1
-100.0%
TOTAL
14.7
16.1
1.4
9.5%
Source: Bloomberg
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Gazprom Deliveries to Europe in Q1 2016
European Far Abroad (E)
Q1 2015
Q1 2016
∆, bcm
∆, %
34.4
44.4
9.9
28.9%
Share in consumption, %
19.6%
25.8%
6.2 p.p.
-
Share in imports, %
62.1%
70.6%
8.5 p.p.
-
Q1 2015
Q1 2016
∆, bcm
∆, %
27.5
38.6
11.2
40,7%
Share in consumption, %
17.4%
25.0%
7.6 p.p.
-
Share in imports, %
37.8%
46.6%
8.8 p.p.
-
Share of EU in Gazprom’s exports
79.8%
87.1%
7.3 p.p.
-
Gas deliveries by Gazprom, bcm
European Union (E)
Gas deliveries by Gazprom, bcm
Source: IEA, Eurostat, Gazprom JSC, Gazprom Export LLC
15
European Hubs Prices Dynamics
Monthly Average Prices of BAFA, TTF Day-Ahead, TTF Month-Ahead,
TTF Futures, $/Mcm
In January-March 2016, prices of European marketplaces decreased, showing a high correlation with oil prices.
After a brief convergence with BAFA hub prices fall below contract prices. In March 2016 the prices of hubs
were at around $150/Mcm. The seasonal spread remains at about $25/Mcm.
Source: BAFA, Bloomberg
16
Asian Price Premium
NBP «Month-Ahead» Prices versus Japanese LNG Prices
In the 1st quarter 2016 "Asian" premium (the difference in spot prices in Asia and Europe) remained at the
average level of the last year about $1.0/MBTE (about $35/Mcm)
Source: Bloomberg, Platts, Ministry of Economy, Trade and Industry of Japan, Customs Statistics of S. Korea and Japan
17
Liquidity on European Trading Hubs
Traded Volumes of Gas and Churn Ratio* on the Main European Trading Hubs
TTF is still ahead of other European hubs in terms of physical and
paper gas trade volumes as well as churns, which increased in Q1
2016 compared to Q1 2015. The liquidity level on the UK NBP
decreased. The liquidity level on other hubs remains nearly on the
same levels not corresponding to the EC liquidity criteria (churn
ration should be above 8).
Sources: LEBA, IEA, Eurostat, ENTSOG, PIRA, National Statistical Agencies as of April 2016.
* The relation of total volume of trading to the consumption in the hub zone.
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Medium-term Gas Consumption Forecast
Medium-term forecasts by the leading industry consultants
(consumption in 2008 = 100%)
CERA forecast points to gradual increase in demand
for gas in the next three years, while PIRA expects
demand stagnation due to prices increases
19
Long-Term European Natural Gas Consumption
Scenarios and Forecasts for European Gas Consumption
Definition of European countries slightly differs from one forecast to another. For the purpose of comparison all forecasts and
scenarios are restated on compound annual growth rates. Forecasts surveyed for the consensus analysis are updated on a regular
basis.
20
Natural Gas European Demand and Production Gap
in 2010-2035
Natural gas European demand and production gap is calculated as the difference between the demand consensus forecast and the
production consensus forecast. Definition of European countries slightly differs from one forecast to another. For the purpose of
comparison all forecasts and scenarios are restated on compound annual growth rates..
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