European flexible gas asset value in a post crisis world – Webinar recap

“Changing flow patterns are changing asset value”

Flow patterns and value capture in the European gas market have changed substantially since Russian supply cuts in 2021-22.

We recently delivered a webinar on European flexible gas asset value in a post crisis world, focusing on pipeline, storage, and regas assets.

In this article we provide a summary of the key points discussed and a link to watch the webinar and view the slides.

Key Takeaways

• Flow patterns and the use of supply flexibility have structurally changed since 2022 as a result of LNG replacing Russian imports.
  • Flow patterns now move from west-to-east vs previous east-to-west direction. Physically & commercially flexible assets are more able to adapt to this new market environment. An example of this shown in changes to interconnector flow in Chart 1.
  • The prospect of a return of Russian gas flows to Europe and further changes to flow patterns is politically complex and holds a lot of uncertainty. It is important to consider scenarios in terms of both impact and likelihood.

• Flexible gas assets such as pipelines, storage and regas are dynamically interacting to balance northwest European markets.
  • We cover evolution of the Dutch gas market as a case study to illustrate this
  • The load duration curve in Chart 2 illustrates how each source of flexibility comes together to balance the market (chart shows volumetric balance against each day and then ranked by highest to lowest demand day.
  • During periods of high demand in Germany, wide locational THE-TTF price spreads incentivise exports from the Dutch market
  • These exports are enabled by strong regas flows as well as strong storage withdrawals
  • The complexity of these dynamics means time spreads must also be considered alongside locational spreads, as these storage withdrawals were driven by the THE price moving above the forward TTF price.

• Government policies and regulatory dynamics can have big impacts on asset value, this seen most recently in the implementation of storage targets.
  • Expectation of high demand to refill storages during summer 2025 sent Summer-Winter spreads positive in recent months, driving negative intrinsic value for storage facilities.
  • This has created a challenging environment for capacity sales across Europe, with capacity either not selling or being sold at extremely low prices.
  • Government subsidy schemes have been announced in Germany and most recently in Italy to support capacity sales and storage refilling.
• Importance of extrinsic value to asset revenues is increasingly relevant in these periods of shifting market fundamentals.
  • This is triggering gas asset infrastructure owners, investors, and capacity owners to update valuations and challenge commercial strategies.
  • We see this as a strong trend in our client work, with high demand for our analytical approach of stochastic modelling, quantifying extrinsic value & assessing uncertainty across all three types of flexible gas asset.

Watch the Webinar

Click here for a recording of the webinar.

Click here for a copy of the webinar slides.

Feel free to reach out to David Duncan (LNG & Gas Director) for a free sample copy of our Global Gas Report with more details on current drivers of LNG & European gas market pricing dynamics (david.duncan@timera-energy.com).