European Gas Supplies Challenged by U.S. Demand

Developments in the three—traditionally separate—regional gas markets of Europe, the Americas and the Middle East/Asia must now be considered in a more integrated fashion, according to a new analysis by the global management consultants Booz & Company.

To date, connectivity of gas markets between the three regions has been limited. However, competition for gas in the Atlantic basin will intensify, especially between Europe and the United States, as Liquefied Natural Gas (LNG) enters the markets.

The report, A Journey From Regional Gas Markets To A Global Gas Market, notes that stricter CO2 regulation—likely to be introduced by a new United States administration—is a key influencer of the supply/demand balance in the Atlantic basin. Europe will face increasing competition with the United States for securing gas supplies in the next decade. Investments in European LNG import infrastructure may not pay off if LNG from the Middle East and North Africa is re-directed towards the U.S. Replacing these volumes in Europe might require additional pipeline gas from Russia and cause further dependency on Russia.

“For Europe, competition with the United States for gas supply might prove to be more relevant in the next decade than competition with emerging countries in Asia,” said Jake Leslie Melville, partner and energy expert at Booz & Company. “European energy companies and governments will need to develop a “Plan B” to secure their mid-term supplies.”