Lights, Camera, Action

Cannes, famous for its International Film Festival, saw more stars this year as the 21^st Annual European Autumn Gas Conference (EAGC) took place at the Hilton Hotel on La Croisette, drawing delegates from many European countries. 

During the host address, Jean-Marie Dauger of Gaz de France, pointed out that twenty one years ago at the first ever EAGC the same questions were being asked then as they are today, namely; pipeline from Norway, should it go the UK or Europe? Is nuclear and coal disappearing? And Security of Supply was an issue then, just as it is today! 

Looking at the various issues that the modern gas markets face, Jean-Marie made mention of gas becoming the main fuel for power generation Europe wide, and that the question isn’t how high or how low gas prices are, but how do we deal with high gas prices. Whilst security of supply is an issue, along with the incident with Russia and Ukraine last winter, CO₂ issues are seen to be more important because it is higher on both political and the public minds and agendas. 

Francois Debien of Tegaz, an arm of Total, which currently supply 10% of France’s natural gas, are planning to increase this to 15-20% by 2010 as their way of reducing supply problems in France. For this to happen though they require the French government to remove the capped tariffs. 

Anne Quinn from BP, talked about Europe in a Global context. Supply to the EU, in the short to medium term is both robust and diverse, she said, with indigenous and LNG. Imports were up to 5.5 Bcf compared to 3 Bcf in 2000 and LNG has an expectation to grow substantially. EU supply also robust in the medium term, but in the long term there will be more dependence on LNG. Future gas demand is uncertain, but price will be driven by power sector. 

Tom Therkildsen from Statoil, commenced with a very bold statement. “EU Supply Shortage is not justified!” he said. He talked about how the business used to go together as simply as Lego bricks, but now it is more complex like a jigsaw puzzle. Gas reserves have actually increased over the last five years and LNG has increased gas moveability.

Tom seemed quite convinced that prices would not stay high for long and that Russia should be encouraged to flow gas into the EU market place.

The perceived Security of Supply problem is within the borders of particular countries and not a global concern, he said.

There are tasks needed to help this situation though and these are:

• Deliver new supplies
• Contribute to improve environment
• Develop new technologies

Sleepless in Brussels 

Part of the fun of this conference was the audience participation. Everybody was able to vote electronically and every now and again we were asked to vote on various things. This gave a general feel about what we all thought about various issues. One such issue was the EU Commission and competition in Europe. The majority consensus (43%) was that the EU Commission had lost the plot with regards to competition in Europe. Close on its tails, 40%, felt that the Commission talked the talk but did not walk the walk. Sir John Mogg was not in agreement with the majority and presented his case that they were in fact on track. He spent most of his talk being extremely defensive about the Commission and what he felt they were doing, but it has to be said, we were not convinced. 

Trading Places 

Vitaly Vasiliev from Gazprom Marketing and Trading announced that the public perception of Gazprom is not a correct one. Apparently the myths which include; Gazprom is an unsophisticated commodity producer and sells only under long-term contracts should be replaced with Gazprom is a complex service provider and trade using short and midterm contracts along with retaining the long-term “take-or-pay” contracts and is active on the spot markets at hubs.

Russia is expecting to be a major contributor of gas to the liberalising markets of North West Europe, with Gazprom being a major player in this market. Gazprom M&T is progressively growing a portfolio of capabilities to deploy depending upon market and client requirements. With a bit of work to help myth and reality become the same thing, Gazprom could well improve public perception and gain confidence in the market place. 

BP representative Wijnand Donkers was asked if going green was becoming too expensive. As liquidity continues to increase and uncertainty continues for a while, BP is learning and adapting, making changes across its business and taking a responsible lead towards cleaner energy. 

Looking at the relevance of coal in the evolving market place, Riaz Rizvi of Constellation Energy Group talked about how the market place has changed the way coal trades. Until six years ago a mine had to have 15 years of contract backing behind it to make it viable, now short-term contracts are acceptable. There is now supply demand disequilibrium, with no longer any long-term commitments, in a robust market. 

A Star is Born: New Players New Routes 

David Drury of Gas Strategies is predicting that by 2020 an additional 200Bcm/year of new supply will be needed in Europe and although it is potentially available it will have to travel great distances. The question is by pipeline or LNG? Both methods are expensive, but LNG is more flexible as to where it goes and when. 

Other speakers in this section all tended to agree that there is plenty of gas about, but in all the wrong places for the market. The question is how to get the gas to the right place at the right time. So it could look as though the battle is on between LNG and pipeline, but the beauty of this diverse marketplace is that there is always room for both, and they complement each other well just like a good marriage. One poll showed that 51% agreed that there would be a balance of both pipe and LNG. 

Back to the Future 

As we settled back into the auditorium on the second morning, I couldn’t help noticing the distinct lack of delegates, a sure sign that the night before was a resounding success. See below for what happened as Gaz de France romanced the gas industry. 

Paul QJ van Poecke from 4Gas opened the day with his perceptions as an independent LNG infrastructure player. Over the last three years Europe’s perception of LNG has changed. From being almost ignored as gas supply source, LNG has grown significantly. 

Recent changes have seen Security of Supply become more diverse, Regulators now have teeth, new investments in pipeline and LNG, along with trading hubs and markets and of course LNG as a new supply source. But there are still many challenges facing Europe, including; securing our gas supply, Global pricing of gas and LNG, market consolidation, continued development of market infrastructure, Environmental Policy and opening up of international borders. 

As we continued through the second day the general theme came out over and over again, from both speakers and delegates alike, Security of Supply being highest on the list, although most agreed there is plenty of world reserves, but there is a distinct lack of gas storage which needs to be addressed. LNG also was seen as becoming more Global and good relations across borders also a key in moving gas securely to where it is needed. 

Of the polls taken amongst delegates, 49% agreed that Europe’s most pressing need was gas storage and 46% in a different poll said Europe’s Security of Supply was the greatest problem for national governments.  

On a slightly lighter note, the conference came to a close with the Gas Court, in the form of Kramer Vs Kramer, where father US and mother EU fought over custody of LNG. Jean Abiteboul of Cheniere Energy put up a good argument for Father America. He introduced us to Ellen G and argued that Mother Europe was only interested in her daughter when it was cold. Similarly Piet Kager of Gastransport Services also put up a good argument for Mother Europe, accusing the Father of abandoning Ellen G for almost 20 years. The presentations contain a fair amount of background to LNG as well as future plans and are well worth a look.

A slight twist at the end of the court hearing, in which James Ball (Gas Strategies) was judge, caused 77% of the jury to vote in favour of…

LNG being old enough to go where she pleased as long as she honoured existing agreements.  

All the presentations from this event are available to buy from EAGC at http://www.theeagc.com/page.cfm/Link=8/t=m/goSection=10  

… AND ON THE SOCIAL SIDE 

So there we were, strutting up the red carpet through an avenue of swirling dancers, cameras rolling while the spotlights were picking out the delighted expressions on delegates’ faces… and all this in no less a place than Cannes, home of the International Film Festival!  

The procession hesitated momentarily while each person took a glass of champagne and spread into the nooks and crannies of the walled gardens at the Chateau de la Napoule, the amazing setting chosen by Gaz de France in which to host the Gala Dinner.

It’s not every day that one finds oneself in such grandiose surroundings and this wide-eyed delegate couldn’t help reflecting on the incredible diversity of life in the energy industry.

This was the Twenty-First European Autumn Gas Conference held in Cannes during an unseasonally warm spell (even for the South of France) in mid October. Paul Cassar and I had bravely volunteered to attend the event, not I might add, without some persuasive recommendation following last year’s event at the Excel Centre in London. 

The two-day conference organised by dmg World Media at the Hilton Hotel on La Croisette, the seafront boulevard, did not disappoint. From Monday evening’s reception on the rooftop terrace overlooking the Mediterranean, to the final event, ‘The Gas Court’, the general feel of the conference communicated a much more upbeat and confident approach to the next few years than did last year’s rather cautious prognosis. 

Perhaps it was the setting that contributed to this optimism; who could even begin to think of one-in-fifty winters whilst enjoying the balmy climes of the Cote d’Azur? Yet it was this climate which attracted around 500 delegates to enjoy the ambience and ‘amitie’ of the event. Having such a large number of industry players in one place clearly offers the benefit of a pool of knowledge from which to draw realistic expectations about the future… a sort of industry think tank; or dare I say… ‘gas tank’! 

A superb event; well done GDF for hosting it, all the other sponsors and media supporters involved and dmg for their excellent organisation and administration of the proceedings. 

The next event?  GASTECH in Abu Dhabi (4^th – 7^th December 2006) … can’t wait! 

If you would like to go to EAGC next year then put this date in your diary: 9^th-10^th October 2007, venue Swissôtel Düsseldorf in Germany, hosted by E.ON Rurhgas. It’s the place to be…

Article by our roving reporters: Paul Cassar and Derek West