Natural Gas Outlook - Year V - Issue 8 - November 2013

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Natural Gas Outlook - Year V - Issue 8 - November 2013

published on 11-28-2013

In this issue:

  • Demand. Gas consumption could start to increase again next year, thanks to a recovery in its use for power generation. This will only be possible if hydroelectric and wind power generation returns to average historical levels and forecasts of a slight improvement in the economy are confirmed.

  • Supply. TAP will be the official pipeline for transporting Azeri gas to Europe and the final investment decision should now be imminent, following a complex procedure which led to the definition of access and tariff rules; onshore work for South Stream has commenced at the same time, while on the LNG front, OLT is expected to go into operation in the next few days.

  • Prices. Given the low level of concerns over possible supply shortages over the winter, stable prices are forecast for coming months with low seasonal and TTF spreads. Increases in charges on volumes injected into the network are possible.

Key issues

1. The flexibility of combined cycle plants and demand for gas in the power sector. The greater operational flexibility demanded of gas-fired plants does not seem to have reduced the average efficiency of the fleet. Operators and the electricity system in general will benefit, but gas demand will not.

2. Gas pricing: are we moving towards the end of oil-indexation? The indexing of long-term contracts to oil products is under attack because of the fall in spot prices, but is strongly defended by producers. The practice of hub indexing on the other hand is increasingly gaining ground, but is not to be relied on according to supporters of oil-indexation: will this be a forced transition?

3. New infrastructures

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