19 February 2010
Despite Europe already being flooded with cheap gas supplies, there are proposals from major LNG producers to increase gas deliveries to the EU. It is very likely that wholesale gas prices will not return to pre recession prices for sometime to come. There are a number of short and long-term reasons for this, including:
The lack of demand for gas imports in the North American market, due to the recession.
The rapid development of the North American gas shale industry has further reduced demand for gas imports.
As a result of development in the North American market, Russian, Norwegian and Qatarian gas exports are switching away from the United States and Canada to the European market.
Demand for gas has fallen in Europe due to recessionary reasons. ” Europe has switched away from pipeline gas to cheaper LNG gas imports, as the number of new LNG import terminals open. http://www.oxfordprospect.co.uk/anendtoeurope%27sgascrisis.htm
“The ongoing impact of European Energy Policy and the ongoing expansion of the European gas shale sector, which is likely to reduce further demand for gas imports. http://www.oxfordprospect.co.uk/Europepreparingforanothergasdispute.htm
Already, there are suggestions that the gas destined for the North American market from Russia’s planned Barents Sea Shtokman gas field will be switched to the European market, using the Nordstream pipeline network. There are also suggestions that Norway and Qatar will follow Russia’s lead in production originally destined for North American markets and deliver it to Europe. Such action is likely to keep the price of gas low, even when demand starts to recover in Europe.
The other impact of such market developments is it will further weaken Russia’s negotiating position in energy negotiations between Brussels and Moscow.