BAKU, Azerbaijan, July 21. Europe will become a market which outbids others to get the LNG it needs, and that means it will no longer fulfil its role as the balancing market, said Ann-Sophie Corbeau Global Research Scholar, Columbia University’s School of International And Public Affairs, Trend reports via the International Gas Union (IGU).
She noted that currently, volatility in the gas market is due to the war situation and uncertainty in the markets.
“ In my opinion, volatility will likely become structural. It will increase, first because, in the medium term, Europe will become a market which outbids others to get the LNG it needs, and that means it will no longer fulfil its role as the balancing market; and second, because it will progressively lose what was helping it to play that balancing role. Europe has been acting as the balancing market because it used three pillars to smooth the shocks in global gas markets: coal/gas switching, the interaction between Russian pipeline gas and LNG, and Europe’s large storage capacity (about 100 bcm),” noted the expert.
Corbeau went on to add that looking forward, coal capacity will likely resume its decline in line with the Fit for 55 objectives, even if recent events result in some capacity coming back to ensure lights stay on next winter.
“The willingness of Russia to play a role in smoothing any shock is frankly in question given recent events – if anything, Russia is reducing exports to Europe precisely at a time when the global LNG market tightens (due to the accident at Freeport LNG). We are therefore left with storage, where regulation could reduce market forces. Finally, even if and when Europe resumes its role as the balancing market, its gas demand will become increasingly variable as the share of renewable energies grows and weather patterns become unpredictable (record cold/mild winters or extremely hot summers),” the expert explained.
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