How the C&SEE short-term gas market can become liquid and flexible

Aleksandar Katancevic's picture
Aleksandar Katancevic, Director, Stratega East
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In 2017, EU gas consumption continued to increase, displaying a 5% year-on-year growth and annual consumption reached nearly 465 bcm, as reported by the European Commission. With the constant evolution of liberalised energy markets present in the CEE region, the industry is looking at ways to ensure supply security and diversity in order to successfully develop.

 Ahead of the upcoming CEE Gas Conference, 7-8 March in Zagreb, Gastech Insights spoke with Executive Advisory Board Member and Director at Stratega EastAleksandar Katancevic, to discover his expert views on the region.

Gastech Insights: What is needed in the Central, Southeastern Europe (C&SEE) region to successfully develop and grow?

Aleksandar Katancevic: In order to grow, the C&SEE region requires affordable primary energy access. In addition, to become a 'developed' market requires achieving efficient conversion of primary energy. In the paradigm of developed societies, organized markets are efficient indicators of the development level. Overal, the C&SEE region is required to provide and secure enough primary energy sources and enable the creation of an organized, efficient and transparent energy market.

The C&SEE region, as well as the other parts of EU and the World, are supposed to prepare for a greater demand in electric energy in the next decade. This demand is certainly coming as the consequence of the well-known exponential function of population growth but probably even much bolder due to the imminent switch on electric mobility transportations. I would say that the dawn has come; the C&SEE region must wake up and work harder on securing its primary energy sources and commit to efficient conversions.

Natural gas is the most affordable, the less harmful of the fossils and globally accessible primary energy source for the next decade(s). If converted into the electrical energy, it can be very efficient in decreasing air pollution and could improve the health of the population. Therefore, the switch to the low carbon emissions primary fuel in power generation, such as natural gas, supported with flexible power generation such as CCGTs (Combined Cycle Gas Turbines) required to balance the interruptible generation from renewable technologies, is the unavoidable reality of the C&SEE in the next decade.

C&SEE region must keep and not cut the current sources of natural gas, but rather improve the existing infrastructure and develop the optionality by diversifying infrastructure and supply of natural gas, such as land terminals, FSRUs (Floating Storage and Regasification Unit) for the LNG (Liquefied Natural Gas).

Gastech Insights: The region has seen a shift from oil-indexation to market pricing through regional gas trading hubs. What is required for the development of flexible short-term markets?

Aleksandar Katancevic: For the C&SEE region to arrive at the point in the future where the short-term market will be liquid and flexible to accommodate pressure or shocks in demand or supply side, the following aspects are important::

  • Increase of gas sources
  • Improvement in reliability of infrastructure
  • Investment in flexible storage capacities
  • Flexible and efficient consume (ideally gas-fired CCGTs and CHPs (Combined Heat and Power))
  • Developed power market as a key reference for the spark spread (gas to power margin) versus storage it or reverse flow (export, liquefying)

This is part one of a two-part interview with Mr Karancevic. In part 2 you will find out more about the current trading dynamics in the C&SEE region and how they differ to Western Europe. Be sure to subscribe to the Gastech Insights newsletter so you will not miss out! 

On 7-8 March in Zagreb, the CEE Gas Conference will bring together all key stakeholders of the region, providing an unrivalled platform. Register for your delegate pass today! 

Image courtesy of Stratega East