Abstract.

Demand for natural gas in Europe is expected to grow substantially in the coming years. The expected growth in demand is driven by increasing environmental awareness and technological improvement in the electricity sector. The demand growth takes piace in an environment of regulatory uncertainty and expected low oil prices. How will the industry respond? What will be Norway's role? 1. GAS DEMAND IN EUROPE, EXPECTED DEVELOPMENT In 1992 natural gas demand in Europe, defined as Western Europe plus Poland, Hungary and The Czech and Slovak Republics, amounted to 320 BCM.

The demand may by 2010 reach as much as 520 BCM/yr. See Chart 1.

If we exclude Hungary, Italy and Spain a market remains that potentially could be economically reached from Norway. By 2010 the total demand in this area may have grown from today's level of 250 BCM/yr to about 360 BCM/yr.

The total gas demand in markets in North West Europe constitutes about 240 BCM/yr. By 2010 the total demand in this area may reach around 300 BCM/yr.

Our forecasts are based on the following assumptions:

  • GDP growth of 2–3% annually.

  • Constant energy prices, corresponding to an oil price of U.S.$20/barrel in 93-prices.

  • Gas prices remaining competitive towards alternatives.

As Chart 2 shows a substantial share of demand growth in the coming years will take place in the power sector. The expected growth in the power sector is chiefly based on growing environmental concern and the application of new technologies, such as combined cycles.

The structure of energy input into power production has changed considerably during the past 30 years. In the 1960s coal was the dominating fuel, except in some countries rich in hydro power, like for instance Norway. In the 1960s oil entered this sector with success, but after two oil price shocks in the 1970s oil has lost ground and in some countries it has almost entirely been replaced by other fuels. The market share of natural gas in the power sector increased from about 1% in 1965 to 10% in 1975 (OECD-Europe). Thereafter also gas lost ground.

This was a consequence of the fact that gas prices I Chart 1. Natural gas demand in countries in Europe.

I Proceedings of the 14th World Petroleum Congress 0 1994 The Executive Board of the World Petroleum Congress Published by John Wiley & Sons BCM 500 Mo 5w COMMERCIAL POWERGENERATION 200 I I Chart 2. Demand for natural gas in European countriesby sector. 575 576 SUPPLY AND DEMAND [I 613 Conventinal coal plant 1 Invest./kw Coal I USD 1,350 Natural gas ] USD 71 O mostly were indexed to oil prices. Additionally Chart 3 is based on new coal gasification technatural gas was regarded to be a 'premium fuel', and nology which is known today. Tomorrow's tech-EC introduced a direct

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