A second life for natural gas demand in Europe?

The European Union’s natural gas balance is projected to deteriorate rapidly over the next couple of decades due to strongly decreasing domestic production. According to the IEA’s World Energy Outlook 2011, the EU’s production is expected to fall from 216 bcm in 2008 to 89 bcm in 2035. Different energy models come to different conclusions concerning the evolution of demand, but none of them project demand falling fast enough to offset the fall in production before at least 2030. In this paper the goal is to focus more closely on selected strategy drivers and on specific market segments in order to shed light on what may drive EU gas demand in future. Brief sections follow, addressing power generation costs and the price of carbon; recent political decisions to move away from nuclear power; and natural gas in the transport sector.

► Energy model projections and key drivers for EU gas demand are reviewed.
► One major model projects on-going growth to 2030, another a moderate fall.
► Support policies for renewable energy can have a crowding-out effect.
► Germany’s nuclear exit decision will not prevent a fall in total gas demand.
► Transport is seen as a new source of demand but volumes are likely to be modest.