BAKU, Azerbaijan, April 29
By Leman Zeynalova – Trend:
Italy is forecast to experience Europe’s largest loss of gas demand as a result of the outbreak – reaching 4.4 bcm under three months of lockdown, Trend reports citing Wood Mackenize research and consulting company.
“However, while the nationwide lockdown has been extended to 3 May, some small retailers have re-opened and some manufacturing has returned. Our analysis already shows a clear rebound in gas and electric demand over the last week – though still well below pre-coronavirus levels. Of course, the lasting effects of a weaker Italian economy will still have to be factored in even beyond the lifting of lockdown,” the company said in its analysis.
Wood Mackenzie believes that the full impact of coronavirus on gas demand will depend on the length and depth of lockdowns and restrictions.
“If current coronavirus restrictions persist for three months, we now estimate that 17.6 bcm of demand will be lost across seven of Europe's largest gas markets: Germany, UK, Italy, France, Spain, Netherlands and Belgium. This compares to a pre-coronavirus full year gas demand forecast of 371 bcm in 2020 for these markets, which together account for 70 percent of European gas demand,” reads the report.
The analysis shows that in Germany, Europe’s largest gas market, industrial demand initially proved relatively resilient.
“However, this has lost momentum since country-wide social distancing restrictions and lockdowns in some states were introduced. Overall, demand is set to drop by 3.5 bcm if the current restrictions last for three months,” said the report.
Wood Mackenzie notes that gas production in Europe has not yet been significantly impacted by the spread of coronavirus.
“European gas producers have delivered only minimal adjustments so far. Supply changes have been driven by other factors, including legacy decline and mild weather. Operators are focused on limiting the impact of the virus on production by delaying non-critical maintenance and adapting workforce patterns so that they can continue producing. However, with European hub prices remaining low, some operators will face challenges in covering even their short-run marginal costs. For now, some of Europe’s legacy pipeline suppliers are falling below 2019 levels,” reads the analysis.
Storage is playing a key role in helping to balance against falling demand, according to the company.
“By the end of March, Europe had a record 57 bcm gas in storage, further weakening an already oversupplied summer market. Attention is turning to Ukraine’s gas storage facilities as a potential solution. Additionally, we are likely to see increased pressure on LNG suppliers to the European market – most notably from the US.”
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