The Future of the South Eastern Europe Natural Gas Market

Introduction

Declining indigenous supply combined with post-recessionary demand recovery mean that Europe's gas market has reached an important tipping point. Central to this is a need to diversify existing supply sources. South Eastern Europe is emerging as an important new transit route for Central Asian and North African gas, as well as a major demand hub in its own right.

Scope

*Insight on likely future supply dynamics in the European gas market set against a backdrop of demand recovery and diversifying supply sources.

*Analysis of new import infrastructure projects and their likely impact on regional supply dynamics.

*A benchmarking of the state of readiness in different markets for impending changes to supply/demand patterns.

*An overview of which markets are likely to increase their dominance and relative importance in the European gas sphere.

Highlights

European gas consumption is reaching maximum production capacity. It's 8% buffer of supply over demand is not sufficient to ensure continued security of supply, particularly given that demand will rise as post-recessionary economic growth gains ground.

South East Europe is one of the largest sources of untapped natural gas in Europe. However, infrastructure is often insufficient to exploit this.
Fortunately, many of these countries have shown strong economic growth in the last 10 years and, in many cases, have recognized that weak infrastructure is the primary factor limiting further growth.

Western Europe cannot rely on Russia for its natural gas if it intends to weather future price spikes or gas shortages. Gazprom is currently facing the challenges of Qatari LNG arriving in Europe and US shale gas collapsing the price of gas. It will face further problems when Russian production fails to meet demand growth.

Reasons to Purchase

*Understand the growing role of South East Europe as both a gas supply route and as a new investment zone.

*Analyse the impact of the range of planned, possible and confirmed pipeline projects in the region.

*Formulate a strategic response to changing gas supply routes and understand the new demand led dynamics this will create.


Report Highlights
European gas consumption is reaching maximum production capacity. It's 8% buffer of supply over demand is not sufficient to ensure continued security of supply, particularly given that demand will rise as post-recessionary economic growth gains ground.

South East Europe is one of the largest sources of untapped natural gas in Europe. However, infrastructure is often insufficient to exploit this.
Fortunately, many of these countries have shown strong economic growth in the last 10 years and, in many cases, have recognized that weak infrastructure is the primary factor limiting further growth.

Western Europe cannot rely on Russia for its natural gas if it intends to weather future price spikes or gas shortages. Gazprom is currently facing the challenges of Qatari LNG arriving in Europe and US shale gas collapsing the price of gas. It will face further problems when Russian production fails to meet demand growth.
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DATAMONITOR VIEW 1
CATALYST 1
SUMMARY 1
CONTENTS 2
Segmentation of the natural gas market 2
Status quo 2
Natural gas demand: Mediterranean responsible for Europe's demand growth 2
Natural gas supply: Italy, Spain and Turkey are optimal import routes 2
Current changes 2
Change drivers/barriers: fear of Russian dependence 2
Planned changes: planned pipelines would span all demand hot zones 2
Industry outlook 2
Natural gas demand/supply hot zones 2
Supply/demand forecasts to 2020 for key countries 2
Changes to product and pricing: LNG more important if pipelines fail 2
This report divides Europe along logistics boundaries rather than by geopolitical positioning 2
Europe will be split by natural gas access routes: Europe will be split by natural gas access routes: 2
ANALYSIS 3
European demand profile: recession had little impact on overall demand growth 3
Western Europe: demand has stagnated completely during the recession 4
South Eastern Europe: growth has been continuous and rapid 5
Western Europe needs Russia 6
Demand trends in Europe: growth localized to the Mediterranean and Caspian Seas 7
European supply profile: supply simply will not suffice if demand rises 8
Russia is by far the largest of the few Western producers and only Norway shows any sign of growing 9
Four countries have emerged as the largest producers in a region where production has picked up since 2004 10
Supply trends in Europe: growth localized to the Mediterranean and Caspian Seas 11
Climate targets drive a move away from coal and oil: natural gas and renewables are primary alternatives 12
Can South East Europe develop its own energy market? How will this interact with Western needs? 12
Political involvement is rising because increased competition for gas may lead to national shortages 13
Energy shortages may be good indicators of natural gas growth hotspots 13
South East Europe faces large energy shortages due to weak infrastructure, especially as demand is likely to increase in time 14
Western Europe is struggling to meet its large gas demand without Russia's help 15
South East Europe will see the fastest response to gas shortages, as infrastructure projects are expected online in 2010-12 16
Infrastructure developments are the key indicators of Europe's future gas market 17
Pipelines are likely to swarm into Italy and Turkey, opening up the entire Mediterranean to natural gas 17
Major cross-border pipelines into Europe 18
South East Europe has sprawling infrastructure developments and Italy is likely to be a major hub 19
LNG is the future of natural gas transmission but, although pipelines have an essential role, they are experiencing delays 20
The importance of natural gas in national power generation: North Africa, Italy and Spain are key users of gas-fired power 22
Industry is often a driving force for natural gas demand: Egypt, Turkey, Iran and Slovakia are booming 23
Infrastructure is the main hindrance to a mature gas market, but Mediterranean Europe is keen to avoid this 24
Demand hot zones: key players in the future of natural gas demand - Iran emerging as a production giant 25
Supply hot zones: the UK is losing territory as a major gas consumer 26
Which countries will be the key players in Europe's natural gas market to 2020? 27
Iran is unlikely to become a net exporter in the foreseeable future as its demand exceeds supply 28
Turkey is a key player, driven by its growing industry, its important location and its improving infrastructure 29
Turkey 29
Italy will play a key role in Europe, as shrinking supply means that imports will have to increase to meet demand 30
Italy 30
Egypt has excellent demand growth but, most importantly, it has steeper supply growth to feed Europe 31
Algeria shows very positive supply potential, although its domestic demand is less encouraging than Egypt's 32
Libya emerged in the gas market in 2004 thanks to major gas finds, but even without further finds, Libya is key to Europe's supply 33
France is at the heart of European gas demand, and the end of the recession should encourage renewed demand growth 34
Germany is not expected to rely too heavily on gas imports, with renewables taking a share of the burden 35
The Netherlands will play a smaller role in the gas market as production shrinks and demand remains stagnant 36
UK demand is growing relatively slowly, while supply is plummeting, creating an urgent need to find more imports 37
Russia's profile is flat: supply should be enough to feed continuing demand growth, with large volumes left for export 38
Russia 38
Will any other factors affect the European natural gas market? Perhaps product and price will affect dynamics 39
APPENDIX 40
Forecast Data 40
Ask the analyst 41
Datamonitor consulting 41
Disclaimer 41
List of Figures
Figure 1: Total European natural gas consumption since 1990 3
Figure 2: Total Western natural gas consumption since 1990 4
Figure 3: Total South Eastern natural gas consumption since 1990 5
Figure 4: Total Western natural gas consumption Vs Total Western natural gas production without Russia 6
Figure 5: Map of European natural gas demand trends 7
Figure 6: Total European natural gas production since 1990 8
Figure 7: Total Western natural gas production since 1990 9
Figure 8: Total South Eastern natural gas production since 1990 10
Figure 9: Map of European natural gas supply trends 11
Figure 10: Causes of natural gas shortages in 2008/9: South East 14
Figure 11: Causes of natural gas shortages in 2008/9: West 15
Figure 12: Chart to show how prepared countries are to respond to their natural gas shortages 16
Figure 13: Map of major pipelines into Europe 17
Figure 14: List of the most important pipelines feeding European natural gas markets 18
Figure 15: Map of planned natural gas storage sites 19
Figure 16: Map of all LNG terminals in Europe 20
Figure 17: Datamonitor Ranking of how prepared Europe is for natural gas growth 21
Figure 18: Share of natural gas in power generation - scored ranking 22
Figure 19: Scale of Industrial natural gas consumption - scored ranking 23
Figure 20: Scale of natural gas infrastructure - scored ranking 24
Figure 21: Key European gas demand markets forecast to 2020 25
Figure 22: Key European gas supply markets forecast to 2020 26
Figure 23: Datamonitor forecast of Iran's natural gas market to 2020 28
Figure 24: Datamonitor forecast of Turkey's natural gas market to 2020 29
Figure 25: Datamonitor forecast of Italy's natural gas market to 2020 30
Figure 26: Datamonitor forecast of Egypt's natural gas market to 2020 31
Figure 27: Datamonitor forecast of Algeria's natural gas market to 2020 32
Figure 28: Datamonitor forecast of Lybia's natural gas market to 2020 33
Figure 29: Datamonitor forecast of France's natural gas market to 2020 34
Figure 30: Datamonitor forecast of Germany's natural gas market to 2020 35
Figure 31: Datamonitor forecast of Netherland's natural gas market to 2020 36
Figure 32: Datamonitor forecast of UK's natural gas market to 2020 37
Figure 33: Datamonitor forecast of Russia's natural gas market to 2020 38
Figure 34: Forecast supply and demand data 40

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