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Event context

Gas markets have seen major changes within the last five years. Faltering demand, caused by the ongoing financial and economic crisis, coincided with supply increases in unconventional gas, notably due to soaring shale gas production in the United States. This resulted in major shifts in the natural gas landscape and may have important implications for energy contracts, energy market structures and energy security in natural gas.

In Europe, re-directed cargoes of Liquefied Natural Gas (LNG) – initially destined for the now-saturated U.S. market – hit deeply depressed demand in late 2008. As a consequence, gas markets turned soft, replacing a prevalent sellers market that had given considerable (market) leverage to gas exporters such as Russia during the first half of the last decade. Now, long-term take-off contracts are being reconsidered, giving way to short-term arrangements and spot market transactions. Further, feeling the heat from its Western European customers, major exporters to Europe partially started using much lower spot prices as reference points instead of the common oil price peg. Finally, Russia, the once dominant supplier, is consistently loosing market shares on European consumer markets. These shifts have led several observes to call shale gas a ‘sea change’ in European energy security.

Globally, gas markets are likely to integrate more deeply. To date, natural gas has very much remained a regionally traded commodity, a result of the difficulty and cost of transport, with natural gas trade remaining by and large restricted to the Atlantic Basin (including Europe) and Asia-Pacific region. Recent developments however suggest that spot prices (e.g. on Henry Hub in the U.S.) tend to increasingly influence market developments in other world regions (e.g. NBP in the UK), a result of enhanced LNG trade. More integrated markets may offer opportunities in terms of liquidity and pricing; however, they may also entail new risks.

Such risks may include increased price fluctuations stemming from more volatile spot markets, emerging possibilities to at least partially cartelize globalizing gas markets and incentive problems for investment in key producer countries. In sum, the changing structure of the international gas business is both raising a number of critical political and economic challenges that require careful attention, not at least by the Atlantic alliance.

Event objectives

This high level conference explored and discussed the transatlantic dimension of the shale gas "sea change" and the governance challenges that now emerge on a variety of fronts.

The first panel session took a closer look at the Shale Gas "revolution" in the US and its implications for international gas markets and European energy security. A second panel session discussed the transatlantic policy options. Working group sessions provided the opportunity for participants to break into smaller groups and dig deeper into the specific issues.

This TEGD brought together professionals from all sectors (governments, NGOs, business, the media, think tanks and universities) in order to promote constructive debate on these issues. The dialogue sessions were also designed to complement our research program on global energy governance and serve as an important forum for both presenting our ideas and receiving feedback.