European Gas Demand Drops to 2000 Levels

---

Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--Demand for natural gas in Europe has fallen to levels not seen since 2000, according to the International Energy Agency.

"The demand has totally collapsed," Sofie Corbeau, senior gas expert at the IEA, told Natural Gas Europe. "I mean it was already on a downward trend, but with the weather effect across all Europe we are seeing in some cases demand being down by up to 20%. So this year from the demand perspective is going to be way below, probably at the level that we saw at the beginning of the year 2000. So we are back to one decade ago."

The IEA recently released its Medium-Term Market Report 2014 for Natural Gas, showing a 26% drop in demand over the past year in what it classified the Organisation for Economic Co-operation and Development (OECD) Europe region. The drop in Former Soviet Union (FSU)/non-OECD Europe was higher at 31%. In the same period gas supply fell 9% in OECD Europe and by over 50% in FSU/non-OECD Europe.

It stated: "The [global] medium-term outlook remains optimistic for the future of natural gas, with demand reaching 3 980 bcm [billion cubic meters] by 2019, despite a slight reduction from last year's outlook due to lower growth in Europe and FSU/non-OECD Europe.... Nothing is set in stone, however. European gas and power companies would not have predicted in 2010 that their gas-fired plants would have to close three years later. Still, the power generation sector represents the backbone (53%) of future natural gas demand growth across all regions, even Europe, followed by industry (32%)".

According to Eurogas, which represents the European gas industry, total gas consumption in Europe's 28 member states fell for the third year running last year. According to its most recent estimates this year, total demand was down 1.4% in 2013, following the 10% and 2% decline in 2011 and 2012, respectively. Overall in 2013, gas demand remained under pressure predominantly due to reduced usage in the power sector.

Beate Raabe, Secretary General of Eurogas, explained: "The decrease in demand for gas in power generation can be partly attributed to increased competition from subsidised renewables. However, the paradoxical situation in which a higher greenhouse gas (GHG)-emitting fuel such as coal continues to displace gas is still very much the reality and emphasises the need for swift change".

The outlook remains depressed for the European gas sector. The IEA's Corbeau outlined: "In the medium term, European gas production is going to decline, like in the U.K. we see a slower decline compared to what we saw before, because before in the United Kingdom it was declining 6% per year. So it's going to stabilise somehow, but unless there is a development of shale gas, which doesn't look to be happening tomorrow, it's going to be very, very difficult to reverse the trend. And even if you are relatively optimistic regarding shale gas, at best you are going to have a stabilisation of European gas production, but you have to be extremely optimistic to see a reversal".

The U.K. government is determined to remove any obstacles in its drive to exploit potential shale gas deposits. In May, it outlined new legislation to speed up the planning process for initiating shale gas drilling projects. For additional information, see May 30, 2014, article - U.K. to Speed-Up Shale Gas Access.

Last summer, the government revealed significant tax breaks to attract investors to the sector by offering to halve the tax they pay on profits. For additional information, see August 2, 2013, article - Shale Gas Tax Breaks for U.K..

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.