ECN: Europe needs more gas storage

Over the next twenty years the need for gas storage in Europe will increase. Even if the demand for natural gas were to fall, extra gas storage capacity should still be built. “That has everything to do with seasonal flexibility”, says Jeroen de Joode of ECN Policy Studies. “Although Russian and Norwegian pipelines bring gas to northwest Europe they will never be able to provide the same seasonal flexibility currently available with our own production fields such as Slochteren.”

The rising demand for gas storage is revealed in the report ‘Developments on the northwest European market for seasonal storage’ by ECN researchers Jeroen de Joode and Özge Özdemir. In this they demonstrate that the demand for gas storage in northwest Europe between now and 2030 will rise regardless of the varying growth scenarios in the demand for natural gas. Even if the demand for natural gas were to fall over the next twenty years, additional gas storage facilities would still be needed. These storage facilities are needed in order to meet the peak demand every winter. De Joode: “Seasonal flexibility is the capacity to meet the changing demand for gas in the different seasons.” This is particularly applicable in northwest Europe where a large part of the gas demand is for household use. In winter, after all, more gas is needed to heat houses and other buildings than in summer. However, as the gas fields in northwest Europe become depleted so their capacity as buffer to meet highly fluctuating demand will decline. Hence the increasing need for gas storage facilities.

Development of winter demand for gas storage facilities (1990 – 2008) in northwest Europe where the demand in Germany (yellow), in particular, rose tremendously (click for enlargement). 

Update
The ECN report, written under assignment of GasTerra, is an update of the study by the Clingendael International Energy Programme of 2006. This report also identified a rising demand for gas storage for European OECD countries. The ECN report of September 2009 focused on northwest Europe: the Netherlands, Belgium, Germany, Denmark, France, Ireland, Luxemburg and the United Kingdom. Although the areas considered are not exactly the same, both reports demonstrate that the demand for gas storage facilities will rise in the coming years. The difference is that the figures in the ECN study are a little lower on account of a downgrading of the future demand for gas. This downgrading is connected to both the 2020 EU targets in terms of energy saving and sustainability and developments in respect of the security of gas supply.
Gas storage will become increasingly important to the ability to provide seasonal flexibility. This is the conclusion ECN has reached based on an analysis of the historical data of the International Energy Agency (IEA). De Joode: “The most important reason for this is that the domestic gas fields of the Netherlands and the United Kingdom are depleting. In the early 1990s the two countries could meet 60 per cent of the peak winter demand with their own gas fields. Now, twenty years later, this percentage has dropped to below 40 per cent.”
Neither the gas imports through the pipelines from Norway and Russia nor the LNG tankers from Algeria and Egypt are able to compensate this loss of natural and cheap flexibility. Remarkably enough the gas supplied from Norway offers more flexibility than the Russian supplies, possibly because of the distance to the northwest European market. LNG imports do not yet contribute fundamentally to seasonal flexibility in Europe, according to ECN.

Future demand
In order to estimate the future demand for gas storage facilities ECN has used a market model for the European gas market. Fed with realistic cost prices this model generates an estimate of the gas storage capacity needed to meet the seasonal flexibility requirement. Based on a ‘business as usual’ scenario ECN estimates that in 2015 some 17 billion cubic metres of gas storage capacity will be required to provide seasonal flexibility, because the share from the gas fields in the Netherlands and the UK will fall from the current 30-40 percent to a mere 5 percent in 2030. Gas imports will only be able to compensate this to a certain degree, the ECN analysis revealed. In other words: over the next twenty years gas storage will have to provide the necessary seasonal flexibility.
“Up to now, the gas market has always been able to offer sufficient seasonal flexibility”, Mr de Joode said. “But substantial investments will have to be made over the coming years if we are to continue to have sufficient capacity in the near future.”  According to him at least 46 percent of the currently known investment projects for gas storage will have to be realised in order to cover the demand for seasonal flexibility. “The required success rate of 46% is much higher than in recent years. In that period most plans did not reach fruition. The definitive decision recently made by TAQA to invest in the Bergermeer gas storage facility near Alkmaar in the Netherlands is a step in the right direction in this respect, as the existing gas storage facilities and those currently under construction will not be adequate to meet the demand for seasonal flexibility over the next two decades.”

Source: Energiebeurs Bulletin / Norbert Cuiper

Contact
Jeroen de Joode
ECN Policy Studies
Phone: +31 (0)22 456 8250
E-mail: Jeroen de Joode

Info
Click here to view or download the ECN report on the development of the northwest European market for seasonal flexibility.

 
Graph showing various growth scenarios for the total demand for gas in northwest Europe.

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