Dr. Wolfgang Peters, MBA

Managing Director, The Gas Value Chain Company GmbH, Germany

Former CEO, RWE Supply & Trading CZ, a.s., Czech Republic

IEA: Second gas revolution (LNG) spurs Global Gas

Market

Security of supply re-defined – also for Europe

IEA Caveat: ‘unexpected shocks’ nonetheless

possible

Interim conclusion: diversity, optionality &

interconnectivity

Misplaced US sanctions: ‘money talks’

Misplaced EC efforts to derail Nordstream 2: ‘Putin

phobia’ no longer warranted

Misplaced German ‘denial’ of need for gas

2

IEA WEO 2016: second gas revolution LNG ‘revolution’

LNG to overtake piped gas in global trade

Source: IEA WEO 2016

3

LNG ‘revolution’: price spreads vs. price regions LNG driven spread arbitrage causes price convergence

4

Source: IEA Global Gas Security Review 2017

LNG ‘revolution’ spurs global gas market: Increasing diversity & interconnectivity

5

Source: IEA WEO 2017

IEA: Second gas revolution (LNG) spurs Global Gas

Market

Security of supply re-defined – also for Europe

IEA Caveat: ‘unexpected shocks’ nonetheless

possible

Interim conclusion: diversity, optionality &

interconnectivity

Misplaced US sanctions: ‘money talks’

Misplaced EC efforts to derail Nordstream 2: ‘Putin

phobia’ no longer warranted

Misplaced German ‘denial’ of need for gas

6

IEA Global Gas Security Review 2016:

Regional approach no longer appropriate

“As the role of gas … evolves, a narrow approach

to gas security focussing on gas as a stand-alone

fuel in an individual region is no longer

appropriate.”

7

Source: IEA Global Gas Security Review 2016

8

Security of supply re-defined – also for Europe

Europe capable of sending price signals by traded markets

Source: Heather/Petrovich, OIES May 2017

9

Security of supply re-defined – also for Europe

North-West European markets >92% hub-indexed

Source: ICIS Heren, European Gas Markets 15-11-2017

Security of supply re-defined – also for Europe

Redundant import capacities: ~220 bcm/a of LNG regas

terminals (~75% idle)

10

Security of supply re-defined – also for Europe

Global LNG supply avails increasing share of flexible volumes

11

Source: IEA Global Gas Security Review 2017

Security of supply re-defined – also for Europe

Global LNG supply response time reduces significantly

12

Source: IEA WEO 2017

IEA: Second gas revolution (LNG) spurs Global Gas

Market

Security of supply re-defined – also for Europe

IEA Caveat: ‘unexpected shocks’ nonetheless

possible

Interim conclusion: diversity, optionality &

interconnectivity

Misplaced US sanctions: ‘money talks’

Misplaced EC efforts to derail Nordstream 2: ‘Putin

phobia’ no longer warranted

Misplaced German ‘denial’ of need for gas

13

IEA Global Gas Security Review 2017 Caveat: Unexpected ‘shocks’ nonetheless possible

14

IEA Caveat: ‘Shocks’ nonetheless possible E.g. Hurricane Harvey reminds of concentration risk Gulf Coast

15

Source: IEA Global Gas Security Review 2017

IEA Caveat: ‘Shocks’ nonetheless possible

(Harvey turned out to be a ‘threat’ instead of a shock)

16

Source: IEA Global Gas Security Review 2017

IEA Caveat: ‘Shocks’ nonetheless possible: e.g. Qatar

(also Qatar only threat, not ‘shock’, supplies within 5 year range)

17

Source: IEA Global Gas Security Review 2017

IEA: Second gas revolution (LNG) spurs Global Gas

Market

Security of supply re-defined – also for Europe

IEA Caveat: ‘unexpected shocks’ nonetheless

possible

Interim conclusion: diversity, optionality &

interconnectivity

Misplaced US sanctions: ‘money talks’

Misplaced EC efforts to derail Nordstream 2: ‘Putin

phobia’ no longer warranted

Misplaced German ‘denial’ of need for gas

18

Interim Conclusion: diversity, optionality &

interconnectivity

19

• Security of supply no longer regional

• But ‘shocks’ nonetheless possible

• Ideal market set-up:

• Diversity of (competing) pipeline supplies

• plus optionality to avail of LNG supplies

• plus well interconnected markets

IEA: Second gas revolution (LNG) spurs Global Gas

Market

Security of supply re-defined – also for Europe

IEA Caveat: ‘unexpected shocks’ nonetheless

possible

Interim conclusion: diversity, optionality &

interconnectivity

Misplaced US sanctions: ‘money talks’

Misplaced EC efforts to derail Nordstream 2: ‘Putin

phobia’ no longer warranted

Misplaced German ‘denial’ of need for gas

20

Misplaced US sanctions: ‘Money talks …’ – not

sanctions

Source: ICIS Heren

21

Premium NBP over HH required

Full cost: 15% HH + ~$2.25 liquefaction + 0.50 shipping + $ 0.50

regas = ~$3.70/MMBtu

Marginal cost (liquefaction sunk): ~$1.45/MMBtu

IEA: Second gas revolution (LNG) spurs Global Gas

Market

Security of supply re-defined – also for Europe

IEA Caveat: ‘unexpected shocks’ nonetheless

possible

Interim conclusion: diversity, optionality &

interconnectivity

Misplaced US sanctions: ‘money talks’

Misplaced EC efforts to derail Nordstream 2: ‘Putin

phobia’ no longer warranted

Misplaced German ‘denial’ of need for gas

22

Misplaced EC efforts to derail Nordstream 2:SoS has transformed from bi-lateral physical dependency to a

functionality of price signals in an integrated traded market

Ukrainian Crisis 2009: Andrej Budajew, “Putin’s recalcitrant bride”

23

Misplaced EC efforts to derail Nordstream 2:E.g. Lithuania: arbitraging Russian gas vs. LNG

Note: first US cargo 2017 (Cheniere) not a game changer

24

Source: ICIS Heren

IEA: Second gas revolution (LNG) spurs Global Gas

Market

Security of supply re-defined – also for Europe

IEA Caveat: ‘unexpected shocks’ nonetheless

possible

Interim conclusion: diversity, optionality &

interconnectivity

Misplaced US sanctions: ‘money talks’

Misplaced EC efforts to derail Nordstream 2: ‘Putin

phobia’ no longer warranted

Misplaced German ‘denial’ of need for gas

25

Misplaced German ‘denial’ of need for gas

26

Electrification of transport & heat sector would massively increase

power demand (Quaschning: from ~590 to 1,300 TWh)

Source: Quaschning, Sektorkopplung, page 29

27

RES capacity in 2040 ~doubled to 187 GW

RES output 2040: 460 TWh

Short position: 840 TWh

Source: : Quaschning, Sektorkopplung, page 29

Misplaced German ‘denial’ of need for gas

28

How to cover short position?

Higher load factors lignite/coal would increase CO2 emissions

~100 GW additional gas capacity: 840 TWh (at 8,400 Lhrs)

Source: https://www.umweltbundesamt.de/daten/energiebereitstellung-

verbrauch/konventionelle-kraftwerke-erneuerbare-energien#textpart-1

Misplaced German ‘denial’ of need for gas

‘Kalte Dunkelflaute’: residual load requirement

29

‘Residual Load’ needed for complete wind & solar capacities

Weather year 2006 (recurrent) projected on to 2016

Source: Greenpeace/Energy Brainpool, ‘Kalte Dunkelflaute’, page 5

30

Solar + wind capacity 2040: 178 GW

Residual load requirement: 178 GW

Further new GAS capacity: ~178 GW

Source: : Quaschning, Sektorkopplung, page 29

‘Kalte Dunkelflaute’: residual load requirement

For further reading soon to come:

31

‘Energiewende: From Champion to ‘Fossil of the Day’

Without natural gas to save the day, ‘all-electric sector-coupling’

will ensure further fossil of the day awards(www.gasvaluechain.com)

Thank you very much for your attention!

Source: www.climatenetwork.org/fossil-of-the-day