The Impact of a Globalising Market on Future European Gas Supply and Pricing: the Importance of Asian Demand and North American Supply

ii The contents of this paper are the authors " sole responsibility. They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its members. This publication may be reproduced in part for educational or non-profit purposes without special permission from the copyright holder, provided acknowledgment of the source is made. No use of this publication may be made for resale or for any other commercial purpose whatsoever without prior permission in writing from the Oxford Institute for Energy Studies. Preface Over the past five years it has become a commonplace observation that regional gas markets are increasingly influenced by developments in different parts of the world. The shale gas revolution in North America, economic recession in Europe, the Arab Spring and the Fukushima nuclear accident in Japan provide examples of events which have had impacts on gas supply, demand and pricing far beyond their immediate geographical regions. This increasing " connectedness " between natural gas markets is often said to have created a " global gas market " , but much depends on how that term is defined. Certainly the stage of development of international gas trade cannot be compared with the global oil market. But increasing " globalisation "-the fact that European gas stakeholders need to pay increasing attention to what is happening in both North America and Asia-marks a new phase in natural gas development which our research needs to take into account. In his previous studies, Howard Rogers developed a model and a methodology which show the interaction of gas markets on a global scale. This study uses that model to analyse different scenarios of North American gas supply, and Asian gas demand over the next 15 years, showing how these could create fundamentally different outcomes for European supply, demand and pricing. This highlights the relative parochialism of much European gas commentary which, over the past decade, has concentrated on security issues relatively narrowly defined as dependence on Russian gas supplies. The study also examines the impact on Russian gas supply and pricing to Europe of different scenario outcomes in North America and Asia, showing that Gazprom also may need to make uncomfortable choices between volume and pricing of European exports over the next decade. The innovative aspect of this research is that it shows that in a globalising gas market, Europeans need to pay as much attention to what …