ENTSOG Gas Regional Investment Plan South 2017 - Main Report

2.1 Worldwide Context

The global context we face today is one of cheap energy, reduced economic growth and the challenge of maintaining environmental sustainability, particularly with regards to the implementation of environmental policies. During the COP21 held in Paris in December 2015, the necessity of accelerating the reduction of global green- house gas emissions and the promotion of renewable energy was firmly stated. Although some uncertainties remain regarding the future of natural gas use and consumption, in a world driving to a more sober low-carbon society, the conference also suggested some potentially interesting opportunities for natural gas. The conclusions drawn in Paris also underlined the importance of climatic change for both world economic development and public health. The political momentum that emerged at the COP21 suggests that natural gas may play an important role in the world's future energy mix, being a key in the transition towards a low-carbon economy, given that gas is flexible, abundant and cleaner than other fossil fuels. Gas is a large-scale resource used to facilitate electricity production in combination with renewable energy sources, and provides clean heating to industrial, commercial and residential customers. Compared to coal, gas presents the clear benefits of reducing emissions of carbon and highly polluting particles matter that contribute to poor air quality. In the medium and long-term, natural gas has high potential, as it remains a competitive energy supply for a wide range of consumers and countries. Particularly promising markets include marine and road cargo transportation, specifically those using LNG. In the short term, the consequences of lower gas prices are difficult to predict, which will bring considerable uncertainty to the supply side for the coming years. As a result, it is possible that some production investment decisions may be postponed or capacity reduced (Australia LNG), whereas several new production capacity will come into production (Yamal LNG due on 2017, etc…). Another important fact is how the new role of the Unites States as a gas exporter will impact the market, as it becomes more and more relevant. The technical complexity, high leverage, and environmental policy restrictions associated with the exploitation of unconventional gas fields may complicate attempts to replicate the large scale shale gas experience outside of the United States, especially in Europe. In any case, the development of small or medium shale gas exploration fields in some countries may occur. Pricing levels and structures have changed rapidly in the last two years. Regional- ised until recently, NG and LNG prices have declined globally in recent years because of the reduction in oil price, slow demand and increased supply capacity. There was also a better balance between supply and demand in Asia that contribut- ed to the LNG price convergence in the Atlantic and Pacific Basins and reduced arbitrage opportunities for shippers and producers.

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