European Natural Gas Research Articles

Are European Natural Gas Markets Connected? A Time-Varying Spillovers Analysis

Are European Natural Gas Markets Connected? A Time-Varying Spillovers Analysis

GNOME: A Dynamic Dispatch and Investment Optimisation Model of the European Natural Gas Network and Its Suppliers

As indigenous production declines, the European gas market is becoming increasingly dependent on imports. This poses energy security questions for a number of countries, particularly in the north-east of Europe. A suite of mathematical models of the European natural gas network has been borne from these concerns and has traditionally been used to assess supply disruption scenarios. The literature reveals that most existing European gas network models are insufficiently specified to analyse changes in supply and demand dynamics, appraise proposed infrastructure investments, and assess the impacts of supply disruption scenarios over a range of time horizons. Furthermore, those that are suited to these applications are typically proprietary and therefore publicly unavailable. This offers an opportunity to present a new model. The Gas Network Optimisation Model for Europe (GNOME) is a dynamic, highly granular mixed-integer linear optimisation model of the European natural gas network and its exogenous suppliers. GNOME represents demand and supply for all EU-27 Member States except Cyprus, Luxembourg, and Malta. The UK, Norway, Switzerland, Belarus, Ukraine, and Turkey are also included. Russia, the Southern Corridor suppliers, Qatar, North Africa, Nigeria, and the Americas are modelled as supply-only regions. GNOME satisfies gas demand in each country by generating a cost-minimal mix of indigenous gas production, pipeline flows, LNG imports, and storage use. If demand cannot be met using existing infrastructure, GNOME will generate a cost-optimal investment strategy of pipeline, LNG regasification, and gas storage capacity additions. The model solves on a monthly basis, from 2025 to 2040, in 5-year steps. The capabilities of GNOME are demonstrated by tasking it to analyse the impacts of a failure to complete the upcoming Nord Stream 2 pipeline between Russia and Germany. The complete formulation of GNOME including input files, equations, and source code is provided.

Energy transition or transformation? Power and politics in the European natural gas industry’s trasformismo

This paper explores how established natural gas interests responded to climate action in the European Union. Climate policy was initially not anticipated to reduce the role of natural gas in the energy system, if anything, many presumed that it would come to play a larger role. It was widely understood to be the transition fuel, entailing that it could substitute more carbon-intensive source-fuels, such as coal, as society decarbonises. This narrative complemented natural gas industry incumbents’ other forms of power, including their control over resources, infrastructure, and involvement in the policy-making process. Drawing on these, they presumed that their future was ensured in the shift towards a low carbon energy system. As the EU enhanced climate targets, incumbents were forced to adapt the fuel’s discourse according to the changing context. Incumbents deployed their material, organisational, and discursive power to extend the status quo and accommodate pressure to enact far-reaching change – a process Gramsci refers to as trasformismo. By tracing the natural gas industry’s response to climate action, this paper shows how incumbents draw upon their fuel-specific bases of power and it explores the importance of discourses in shaping the trajectory of the energy transition.

European natural gas prices continue to bite

BASF says it has curtailed production of ammonia in Antwerp, Belgium, and Ludwigshafen, Germany, because of a spike in Europe for the price of natural gas, the main feedstock for making ammonia. BASF’s global ammonia production capacity, which includes a plant in the US, is 1.8 million metric tons per year. Yara International recently cut its European ammonia production by 40%, while CF Industries has closed one of its two ammonia plants in the UK.

European natural gas prices continue to bite

European natural gas prices continue to bite

A hybrid approach for high precision prediction of gas flows

About 23% of the German energy demand is supplied by natural gas. Additionally, for about the same amount Germany serves as a transit country. Thereby, the German network represents a central hub in the European natural gas transport network. The transport infrastructure is operated by transmissions system operators (TSOs). The number one priority of the TSOs is to ensure the security of supply. However, the TSOs have only very limited knowledge about the intentions and planned actions of the shippers (traders). Open Grid Europe (OGE), one of Germany’s largest TSO, operates a high-pressure transport network of about 12,000 km length. With the introduction of peak-load gas power stations, it is of great importance to predict in- and out-flow of the network to ensure the necessary flexibility and security of supply for the German Energy Transition (“Energiewende”). In this paper, we introduce a novel hybrid forecast method applied to gas flows at the boundary nodes of a transport network. This method employs an optimized feature selection and minimization. We use a combination of a FAR, LSTM and mathematical programming to achieve robust high-quality forecasts on real-world data for different types of network nodes.

Удосконалення економічного механізму природокористування на місцевому рівні в умовах децентралізаційних процесів

It is determined that the economic mechanism of economic management of the nature is a set of methods, means, instruments and forms of budget-tax and financial-credit regulation of economic development and use in the reproduction process of the natural component of national wealth, as well as the implementation of activities aimed at the reproduction of natural resource potential and environmental protection. It is substantiated that in the current socioeconomic and political-legal conditions, the economic mechanism of economic management of the nature operates with an overly narrowed specification of methods and instruments, which makes it impossible to fully ensure a sufficient level of financing for the implementation of environmental projects and priorities for expanded reproduction and enhance of the natural resource potential. It is proved that in the unfavorable conditions of the European natural gas market for the national economy and crisis phenomena caused by the curtailment of business activity due to the spread of the coronavirus pandemic, budgetary opportunities for financing environmental expenditures are limited. Researches have shown that in the dynamics of the real value of environmental expenditures of both the State and local budgets in 2002-2020 in general, there is a downward trend, which indicates a real decrease in the volume of public financing of environmental protection. It is substantiated that due to the deregulation of land relations, that is, the transfer of the State-owned agricultural land outside settlements to communal ownership, additional resource opportunities have been formed to increase the efficiency of the use of instruments of the economic mechanism of economic management of the nature at the local level. It is determined that in the conditions of an overly unified system of budget and tax regulation of economic management of the nature and limited opportunities for financing environmental activities, ensuring a high level of efficiency of functioning of the economic mechanism of economic management of the nature at the local level requires the installation of a complex of incentives into the range of its instruments and methods. Such incentives will orient the entities of agrarian entrepreneurship to the introduction of additional capacities of organic farming, organic cattle breeding and organic feed production. It is substantiated that such incentives are represented by tax and budget preferences.

Aspects of the European natural gas market in the dynamic context of global energy resources

The purpose of this article is to illustrate the structural changes of the European natural gas market through the lenses of the dynamic economic relations between European Union and its biggest energy supplier, Russia. The economic and political aspects are two essential dimensions to understand the measures taken by the EU in order to assure their security of supplies and at the same time to observe the Russian capacities to maximize their profits driven from its vast energy resources. Otherwise Russia is experiencing some difficulties in increasing its export shares on the European gas market, owing to several geopolitical challenges. Nevertheless, the relation between these two blocks could be defined as one of interdependence and symbiosis due to the evolution of the energy trade agreements. We attempt to identify those different market fundamentals and economic processes that have led to the mismatch between the crescent liberalisation in the EU gas sector and the Russian approach to energy market governance.

Network connectedness between natural gas markets, uncertainty and stock markets

Abstract This paper explores dynamic information connectedness effects between natural gas markets, uncertainties and stock markets in the North American and European regions for high- and low-frequency bands using the time-frequency connectedness network model. The empirical results suggest that the total return and volatility spillover effects in North America and Europe are mainly generated by the high-frequency band (1–12 weeks), whereas the total spillover effect for the low-frequency band (12 weeks to longer) is relatively weak. Generally, in terms of return connectedness, the North American and European natural gas markets act as information receivers to the system. With regard to volatility connectedness, the North American gas market has an impact on energy market uncertainty and economic policy uncertainty, whereas the European gas market acts as an information receiver from economic policy uncertainty. Finally, our evidence shows that both these regional gas markets are affected to a considerable extent by financial market uncertainty in both the short and long term. These new findings suggest some useful implications for investors and policy makers with various time horizons.

DRIVING FUNDAMENTALS OF NATURAL GAS PRICE IN EUROPE

This paper attempted to examine the factors driving the price development of the Title Transfer Facility (TTF) month-ahead contract using linear regression over the period 2016–2019 when the TTF market became the most liquid natural gas hub and primary reference source for gas prices in Europe. We examined the possible fundamentals and used OLS methodology to estimate the linear regression model, which explained the development of TTF MA. We concluded the price based on factors determining marginal demand and supply. The most significant factors seemed to be the variables representing the price of German power and the price of coal since the competition between coal and gas in power generation determines the marginal demand, which sets the price for gas. The change in total demand was another significant factor, although its impact was smaller. The significance of the LNG variable indicated the exposure of European natural gas price to the global supply and demand. The model also suggested the importance of storage capacity for the whole system.

Integration reforms in the European natural gas market: A rolling-window spillover analysis

Abstract This paper revisits the topic of natural gas market integration across Europe. Against the backdrop of three EU gas directives aimed at creating competition and strengthening market connections, and the move towards hub trading and gas-on-gas pricing in the European markets, we adopt and extend the spillovers index due to Diebold and Yilmaz (2009) to examine the path of market connectivity over the period between 2005:7–2018:12. An initial estimation uncovers what might be deemed a ‘clunky’ evolution in the spillover index. We identify the cause of this, and devise a tilted ‘importance weighting based re-sampling’ rolling window estimation strategy which preserves the underlying evolutionary trend without overly weighting the importance of historic outliers. Our results show that although there are periods of deterioration, the level of market connectivity recovers, producing a generally increasing trend of market integration in our sample period. The connectivity index peaks at around 65%, i.e. a little above halfway through to full connectivity. We conclude that the European natural gas market has achieved a non-trivial, albeit not full, level of integration to-date.

Integration of weather forecast and artificial intelligence for a short-term city-scale natural gas consumption prediction

Ruled by the directives and regulations adopted by the European Commission, the European natural gas market is obliged to enable free competition. This process has just started in the Serbian market, and the national natural gas provider (Srbijagas) has started its restructuring. To attain the objective of natural gas market liberalization, it is essential to accurately plan capacities and make precise predictions of future peak consumption at all levels of trade. In this research, an hourly city-scale Adaptive Neuro-Fuzzy Inference System algorithm with the Gaussian membership function is developed for both heating and non-heating regimes. In order to upgrade previous studies in this field, besides standard gas consumption and weather variables, hourly weather forecast and lower calorific value were added to the model. The model output is predicted hour-ahead natural gas consumption. To measure the predicting performance of the two models proposed in this research, the Coefficient of Determination and Mean Absolute Percentage Error were used. For the considered hourly consumption forecast of heating and non-heating models, the Coefficients of Determination were 0.99, while the overall (training, testing and checking) Mean Absolute Percentage Error values were 3.0% and 3.4% respectively. Based on these performance metrics, it can be concluded that for both models, the proposed algorithm resulted in a very satisfactory forecast. An adequate prediction of future natural gas consumption would support all market stakeholders, leading to the development a cleaner and sustainable energy system.

Natural Gas markets in the European Union: Testing Resilience

The liberalization and integration of natural gas markets in Europe have resulted in gas-to-gas competition on a European scale with closely related natural gas prices in the various markets. More recently, the European Union aims to become a resilient energy union which may call for additional policy measures. In this paper we discuss the need for such additional measures on top of the existing measures to liberalize and integrate markets. We test the hypothesis that the European natural gas market is resilient to adequately deal with external shocks by analyzing the five most dramatic supply disturbances in the European natural gas markets over the past decade. We find that the natural gas markets were able to trigger responses by market parties which prevented forced supply of gas to consumers in almost all cases. In one case, infrastructure bottlenecks prevented market players to adequately respond to a shock. Hence, we conclude that the best policy to create a resilient energy union is to further integrate European markets and to further remove barriers for market participants.

Новые условия конкуренции на европейском рынке газа

This article aims to discuss the process of liberalization of the natural gas market in the European Union (EU). The purpose of this research is to show the fundamental characteristics of the gas industry, the process of reconstruction of the European gas market, taking into account the ongoing changes in the context of geopolitical, ecological, and technological determinants of the international and European energy and gas sector. The article describes the structure of the modern European natural gas market, compares the competitiveness of gas transportation methods through trunk pipelines and gas tankers transporting liquefied natural gas. The article examines the impact of the increase in the supply of liquefied natural gas on the situation with the turnover of gas trade in the European market, in particular, how it affects the delivery of hydrocarbons and the growth in the scale of exchange trading. The article examines the Groningen model, which influences the development of gas exchange trading and natural gas trading through long-term contracts. The evolution of the European policy in the field of natural gas, the established strictly regulated version of the “well-functioning” gas market, remains as one too political and unstable experiment. The importance of natural gas changes all the time, depending on economics, the security of deliveries, and sustainability. Furthermore, the focus on that importance and its practical application vary in different parts of Europe. The conclusion is made that a “well-functioning” gas market is characterized by the presence of a large number of suppliers, and competition leads to a noticeable decrease in prices for natural gas. However, in the current situation, the demand for gas turns out to be unstable, and difficult conditions for pipeline supplies are emerging for traditional suppliers. In the long term, the “well- functioning” gas market scheme will remain highly politicized and unstable, with increased competition in supply and a downward trend in gas prices. Thus, the European gas market is transforming towards the formation of a “buyer’s market”.

Структурні трансформації європейського ринку природного газу в контексті енергетичної безпеки

Структурні трансформації європейського ринку природного газу в контексті енергетичної безпеки

Assessing the Performance of the European Natural Gas Network for Selected Supply Disruption Scenarios Using Open-Source Information

Natural gas covers more than 20% of Europe’s primary energy demand. A potential disruption could lead to supply shortages with severe consequences for the European economy and society. History shows that such a vast and complex network system is prone to exogenous and endogenous disruptions. A dedicated large-scale dataset of the European natural gas network from publicly available information sources is assembled first. The spatial coverage, completeness and resolution allows analyzing the behavior of this geospatial infrastructure network (including consumption) and its components under likely disruptive events, such as earthquakes, and/or technical failures. Using the developed system state simulation engine, the disruption impact is mapped. The results show that storage facilities cannot in all cases compensate for a pipeline disruption. Moreover, critical pipelines, such as the Transitgas pipeline crossing the Alps and the Trans-Mediterranean pipeline bringing natural gas from Northern Africa, are identified. To analyze the pipelines with high impact on the system performance, a detailed scenario analysis using a Monte Carlo simulation resulting in supply grade mapping is conducted and presented for the case of Italy. Overall, it can be concluded that locations with a dead-end, sole supply, and without storage facility nearby, are remarkably exposed to natural gas supply losses.

Foreign Policy Followed by the U.S. in The European Energy Market: Shale Gas Revolution and LNG Thrust Against The Russian Dominance

Bu makale, Avrupa gaz pazarının kapasitesini ve Rusya'nın ana gaz tedarikçisi olduğunu göz önünde bulundurmak suretiyle, Avrupa gaz pazarının halen gelişme sürecinde olan Kuzey Amerika gazı için henüz yararlanılmamış bir kaynak olduğunu ortaya koymaktadır. Çalışma, ABD ve Rusya’nın enerji sektörü özelinde ilişkilerine jeopolitik çerçevede geniş ve kapsamlı genel bir bakış sunmakta, diğer yandan hem ABD hem de Rusya’nın enerji politikası için Avrupa enerji piyasasının önemini vurgulamaktadır. Makalede, güvenlikleştirme teorisi ve enerji güvenliği kavramları çerçevesinde ABD’nin dış politikasının analiz edilmesi amaçlanmaktadır. Çalışmada yöntem olarak ABD’nin bölgeye ilişkin enerji politikaları bölgeselcilik kavramı çerçevesinde analiz edilmiştir. Çalışmanın sonucu, ABD’nin Avrupa doğal gaz piyasalarındaki çıkarının, yalnızca Avrupa’nın Rus doğal gazına olan bağımlılığını azaltma konusunda ‘yardım etmenin’ ötesinde olduğunu, ABD’nin nihai dış politika hedefinin Avrupa’nın önde gelen bir doğal gaz tedarikçisi olarak tebarüz etmek olduğunu öngörmektedir.

Leading and lagging natural gas markets between Asia and Europe

AbstractThis study investigates the dynamic relationship between Asian and European natural gas markets. The present study determines whether these markets underwent structural changes following i) the emergence of swing suppliers (Russia and Qatar) who export natural gas to both Asian and European markets, ii) substantial increases in Japan's gas import after the 2011 Great East Japan earthquake and iii) fast‐paced increases in China's gas import from Russia; its import increased significantly in 2011 and thereafter. We attempt to identify changes in the dynamic price process between these two markets and also in the long‐run equilibrium, by applying the price discovery framework (Vector Error Correction model). Main findings are i) Asian and European natural gas markets are cointegrated over the sample period (2000–2017) and ii) Asian market was leading the natural gas market, but after 2011, European market became the leader. Asian market is the major adjuster following the market shock which implies that any changes in European market would be transferred to Asian market. Results have implications for industry and policy analyses, and price risk management in the market.

Convergence of European natural gas prices

Over the period 2015–2050 the consumption of natural gas of European OECD countries is expected to grow more than the consumption of any other energy source. Although these countries are interconnected and in most cases share a common currency, their wholesale national gas markets are highly heterogeneous. We study the determinants of cross-country convergence of natural gas prices for industrial consumers in fourteen European countries. Our empirical analysis is based on the notions of pairwise, relative and σ-convergence. We show that there is evidence of pairwise price convergence and that some key characteristics of gas markets, such as the existence of trading hubs and the degree of interconnection, are positively associated with the existence of a convergence process. This result carries over to the notion of σ-convergence and is robust to a number of changes in the implementation of the statistical tests. The analysis of relative convergence points to the existence of price-growth convergence, while price-level convergence is not supported by the data. Lastly, we assess the short-run implications of price convergence focusing on the speed of reversion to equilibrium after a system-wide shock hits the cointegrating relation.

Comparative Assessment of Life Cycle GHG Emissions from European Natural Gas Supply Chains

Recent studies reporting on the GHG emissions from NG chains where gas is consumed in Europe provide wide ranging estimates. A detailed life cycle GHG emissions estimation of two Norwegian natural gas production and European consumption chains has been carried out and validated with detailed operational data. CO2 and CH4 emissions were estimated at unit process level using engineering calculations, material balance, and high-resolution emissions factors resulting in GHG emissions footprints between 2.26-7.05 gCO2 eq/MJ NG delivered to European markets. The estimated CH4 emissions for the chains as a fraction of production was 0.01-0.04%. Important differences in GHG footprint are observed annually and also between neighbouring fields. Nevertheless, results indicate that the GHG footprint of both the Norwegian LNG and pipeline gas imported to Europe is well below recently reported EU averages.