Gas pricing mechanisms have undergone profound changes during the last decade in Northwest Europe; prices are no longer based on the final users’ gas value but rather on the wholesale gas markets which reflect the supply/demand dynamics.

Gas shippers are adapting their booking strategy relying more and more on short-term cross-border capacity in order to minimize their exposure to long-term commitments. The various players along the gas value chain would be impacted by such a development. Midstreamers would be the first to benefit from increased price spreads as they would be able to recover the costs they have engaged for cross-border capacity bookings, whereas final users would face price increases.

A fragmented wholesale European market would also result in significant disparities between the gas prices paid by end-users in different countries. Such an evolution would strongly challenge the fundamentals of the current European Gas Target Model.

European LNG imports have surged during the first quarter of 2019.

Some EU wholesale gas markets have been more attractive than others in absorbing these additional LNG volumes.

What are the key differentiation factors enhancing the attractiveness of the European regasification terminals?

European LNG imports have more than doubled during the first three quarters of 2019 when compared to 2018.

Europe started playing the role of a balancing market absorbing the excess LNG volumes.

Beyond regasification terminals, gas infrastructure and notably storage facilities play a key role in enabling such a flexible and adaptative supply mix.

In the longer run, LNG imports in Europe are expected to become increasingly needed rather than being an option.