Interconnection Gas Capacity in Europe

As gas consumption increases throughout Europe, more efficient interconnection capacity is needed. By analysing the present state of the European gas market, it is possible to understand exactly what is required to achieve higher interconnection capacity.



Report Highlights
Italy has a large gas market, and the country is undertaking significant investments in future import capacity. Investment in interconnection capacity is insufficient to keep pace, however, which will limit Italy's ability to serve as a transportation hub for neighbouring markets. Because of falling domestic gas production, European gas imports are projected to increase from 61% in 2005 to 80% by 2030. Investment in import capacity will be vital to facilitate this increasing import scenario. Without adequate investment in storage facilities, efficient gas use and transportation will be compromised. With gas penetration increasing, utilization of storage capacity is key to mitigating the effects of demand fluctuations.


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DATAMONITOR VIEW 1
CATALYST 1
ANALYSIS 2
Import capacity has priority over interconnection capacity 2
High pipeline import capacity will spur European gas market development 2
Investments in storage facilities will enhance interconnection 2
The EU must play a more visible role in ensuring adequate gas interconnectionImport capacity has priority over interconnection capacity 2
Import capacity has priority over interconnection capacity 3
As a net importer of gas, investment in gas import infrastructure is vital 3
Investment in interconnection capacity is necessary to facilitate efficient gas transportation 4
The EU emphasizes import capacity over interconnection 5
High pipeline import capacity will spur European gas market development 6
Russia will consolidate its position as a major exporter 6
North Africa will play a greater role in European gas supply 7
Southeast Europe will become a major corridor for gas transportation 9
Italy will become a significant gas player as import capacity increases 11
Higher imports necessitate greater interconnection capacity 12
Investments in storage facilities will enhance interconnection 13
Storage facilities enhance interconnection capacity 13
Greater emphasis is needed on storage investment 14
Storage investment is needed to enhance Italy's position as a transportation hub 15
For example, over 90bcm of import pipelines are connected to Italy, yet only 2.5bcm of storage capacity has been committed for construction by 2015.The EU must play a more visible role in ensuring adequate gas interconnection 15
The EU must play a more visible role in ensuring adequate gas interconnection 16
Increased gas penetration demands enhanced gas interconnection 16
Established interconnections follow commodity price signals 17
Commodity price signals necessitate a bi-directional BBL pipeline 18
The lack of common national consensus on energy issues impedes the further development of gas interconnection 19
Establishing standardized European gas qualities is fundamental 20
Appendix 21
Definitions 21
Datamonitor Consultancy 22
Ask the Analyst 22
Disclaimer 22

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Figure 1: European 2005-30 gas production/import scenario 3
Figure 2: Share of natural gas in final energy consumption, 2006 4
Figure 3: The Nord Stream project will deliver 55bcm of gas per annum into Europe by 2015 6
Figure 4: Algeria will deliver over 30bcm per annum of gas through various pipeline connections 7
Figure 5: The Nabucco pipeline project will deliver over 8bcm per annum of gas into Europe by 2012 9
Figure 6: Italy will become a significant gas player as import capacity increases 11
Figure 7: Relationship between gas inflows and outflows and the size of the domestic gas market, 2006 12
Figure 8: Italy has 16bcm of storage capacity, but only an additional 2.5bcm committed by 2015 15
Figure 9: Bi-directional gas flows into and out of the UK gas market closely follow market prices 17
Figure 10: The BBL pipeline is underpinned by a long-term off-take agreement, but it will inevitably respond to cross-border economics 18

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