Freedom gas to Europe: Scenarios analyzed using the Global Gas Model

Ruud Egging-Bratseth,Franziska Holz,Victoria Czempinski

doi:10.1016/j.ribaf.2021.101460

Abstract

State-of-the-art, open access numerical modeling of imperfectly competitive energy markets offers a sound and transparent way to address topical research questions in energy and commodity markets. We use an open access equilibrium model, the Global Gas Model (GGM), and sector-specific, politically motivated scenarios to investigate the prospects for sales of liquefied natural gas (LNG) from the U.S. into the European energy market. We discuss the risks and opportunities for U.S. LNG and derive implications for policy, business, and finance in the energy sector. We find that Europe is not an attractive market for US LNG in the base case and in scenarios of moderate support of U.S. LNG flows into Europe. In these scenarios, Asia offers higher prices for US LNG and draws substantially higher import volumes. Our modeling results show that the interconnectedness of global gas markets due to an abundance of LNG import capacity in Europe and other regions—particularly Asia—allows for adjustments to global trade patterns that mitigate the consequences of regional disturbances.

Highlights

Numerical modeling has been one of the pillars of research on energy and commodity markets for many decades
The late decline in the Base Case and the low support scenarios are due to a combination of factors, most importantly a strong rise in demand in Asian markets that attract most of the U.S liquefied natu ral gas (LNG) and a simultaneous increase in LNG imports in Europe from South
We investigate the role of U.S LNG exports to Europe and, in particular, the effect of several policies on these trade flows and on natural gas consumption in Europe

Summary

Introduction

Numerical modeling has been one of the pillars of research on energy and commodity markets for many decades. Equilibrium modeling takes into account imperfect market structures (Gabriel et al, 2013). Owing to their complexity, the application of equilibrium market models has been largely limited to academic research. Before the shale gas boom led to a massive increase in domestic production, the U.S had been a net importer of LNG for many decades (Ruester and Neumann, 2009). It began importing in the 1970s, relying primarily on three LNG regasification terminals on the East coast (Everett, Cove Point, and Elba Island) as well as one on the Gulf coast (Lake Charles). A large number of new liquefaction projects were developed (see Table B1 in the Appendix for a complete list of LNG projects in the U.S.)

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Results

Conclusion