The 2017 European Autumn Gas Conference (EAGC) commenced last week with a day of insights from traders and analysts. Topics included market liquidity, LNG indexing, changes to the supply mix, environmental initiatives, and technological advances.
Speakers and delegates focused heavily on the seemingly-hollow promise of a glut of LNG. Global liquefaction capacity is rising dramatically yet additional volume landing in Europe has been minimal at best. Gas Infrastructure Europe estimates utilization rates of European regasification capacity increased by about 5% from 2016 to 2017, a year-over-year change that falls short of many expectations. Market participants are left wondering if the LNG buzz will ever have a material impact in Europe. Having more excess regasification capacity than any other region, Europe is physically primed for LNG receipts - so will they ever arrive?
Non-physical factors might to be to blame for the low regas utilization rates through Europe. Speakers voiced the need for a European LNG index, uncompetitive pricing against pipeline imports, and the stronger pull of established and emerging demand in Asia as causes of the European LNG drought. While Cheniere agrees to possible long-term agreements to supply LNG to Chinese National Petroleum Corp. (CNPC), there are still limited supply agreements between U.S. LNG producers and European importers.
Market unification and liquidity was included in many presentations with strikingly different conclusions. Speakers representing the Northwestern European regions highlighted massive strides in the region’s interconnectivity and the maturity of the TTF hub. One panelist even suggested that liquidity had been reached, asking “if we don’t talk about liquidity anymore, does this mean we are there?”.
Opinions from speakers representing the Southern, Central and Eastern European regions, where many projects to improve interregional connectivity are still underway, discussed serious challenges to establishing liquid trading hubs and sufficient transportation capacity along critical corridors. Italy is undertaking a major initiative to create a south-north liquidity corridor through the country to benefit trade at the PSV hub. The project aims to reappropriate contracts for existing capacities and establish a baseline variable cost equal to the cost to enter the Italian network. Despite this, many are concerned substantial liquidity will not be achieved without a new player, with financial capability similar to the banks, entering the market.
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Featuring high level speakers with content tailored for the trading community, the 2017 European Autumn Gas Conference Trader's Day provided key insights. Learn more about the the 2018 event taking place in Berlin.
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