The International Energy Agency has revealed that Europe has saved up to $8 billion because surging U.S. shale production and a shake-up in EU energy markets forced Russia to change its gas pricing mechanism.
The Executive Director of the agency, Fatih Birol, while releasing the annual gas report said 2018 was a “golden year” for natural gas which accounted for 45 percent of total global energy growth, which in turn was the fastest in two decades.
According to Reuters, he said the shift in global gas markets stemming from the U.S. shale gas revolution, a rapid expansion of the liquefied natural gas industry and EU liberalization of energy markets, had forced Russia to change its oil-indexed pricing of gas.
Birol also revealed that the change began when rising U.S. gas output led Qatar, the world’s largest LNG exporter, to divert LNG supplies to Europe, shaking up pricing on the continent and widening the influence of the Dutch TTF benchmark price.
“Because of the big challenge from LNG and better regulation, there was a lot of renegotiation of pipeline contracts and we estimate in 2018, Russian pipeline exports to Europe were $8 billion cheaper than they would have been with conventional oil indexation.
“If there were a full adoption of the EU Directive, we could see more LNG to Central Europe where prices are $0.50 per mmBtu (million British thermal units) higher than TTF. This would lead to an additional $1.3 billion a year in savings,” he said.
The IEA in its annual report forecast the LNG market to grow 26% between now and 2024 to 546 billion cubic meters, with China becoming the largest buyer and the United States the biggest seller.