Scope, purpose and organization
Programme Committee B: Strategy, Economics and Regulation
Introduction
The work of Programme Committee B (PGC B) in the triennium 2003-2006 has brought light into many important issues but has also opened questions on matters the gas industry had taken for granted in preceding triennia.
The world is not running out of gas we say, but it is not so clear whether gas demand can maintain the high rates of growth predicted in the past. By the same token, it is neither clear that natural gas would remain the fuel of choice for power generation. In other words, there might not be security of gas demand in the long run if price increases and high volatility remain.
The traditional confidence in the ability of the gas industry to grant a continuous flow of gas to the market might be under question. Could gas companies afford the needed investment once margins in national markets have been curtailed due to competition and separation of business? Will wholesale suppliers be in an equal position to negotiate purchase contracts if the purchasing side of the deal has been fragmented?
According to the above scenario, PGC B has a wide and challenging job ahead and shall try to shed some light into these questions, focusing the attention on the most sensitive issues such as the new drivers for supply and demand, the key role of gas prices and the kind of company structures that best fit the new business environment in different parts of the world.
The Argentine Presidency has established as the first strategic guideline of the 2006-2009 Triennial Work Programme the following:
The Global Energy Challenge: Reviewing the Strategies for Natural Gas towards 2030
PGC B will act as one of the key custodians of this guideline, and concentrate most of the scenario analysis within this time frame, a period in which not only a lot can be done at policy level and on infrastructure, but also where major energy-domination shifts are hinted, and where IGU’s policy recommendations should have its more relevant impact.
The name of PGC B for the 2006-2009 triennium will be “Strategy, Economics and Regulation” and will develop its work through three Study Groups:
- Supply and Demand to 2030
- Gas Price Formations and Trends
- Regulation and Future Industry Structure
It is our intention that the corresponding deliverables will act as effective and accurate decision-making tools, for all stakeholders of the gas industry.
Study Group B.1: Supply and Demand to 2030
Scope and purpose
The Group will cover both supply and demand based on existing information from reliable sources, and will analyse major supply and demand drivers with respect to strategies developed in different regions.
The approach will be from regional to global estimations with the aim to provide IGU associates a comprehensive view of market trends in supply, demand and inter-regional trade until 2030.
Taking into account the specific horizontal nature of this task, the Group will need to maintain close contact with the IGU Coordination Committee and with the other Working Groups and Programme Committees and close relation with international energy institutions and forecasting entities.
Study Group B.2: Gas Price Formation and Trends
Scope and purpose
The reduction of price peaks has currently been considered the gas industry’s biggest challenge; therefore, a deep analysis of medium and long-term gas price economics is needed.
Price formation models, price indexation, price drivers, price arbitrage and elasticity for achieving a sustainable growth are some of key issues to be studied by this Group.
The intrinsic quantitative nature of this topic will somehow determine the professional profile of experts best suited for joining this Study Group.
Study Group B.3: Regulation and Future Industry Structure
Scope and purpose
Changes in the gas regulatory frameworks are prompting radical adjustments in the traditional structure of the gas industry worldwide.
Being one of the key objectives of PGC B to provide a vision of the gas industry in the horizon of 2030, the supply and demand forecasts will be complemented by a perspective view of the developing regulatory regimes and the ensuing industry and market structures.
This Study Group will take stock of the work carried out this triennium on regulatory models around the world and focus on their influence on companies’ structures.
Study Group B.3 will first highlight the driving forces for structural changes: opening of the markets, separation of transmission from supply, synergy between electricity and gas, growing role of LNG and globalisation of gas markets, increasing financial needs for energy projects and, not least, growing environmental sensitivity.
Finally, from a micro economic approach, the Group will examine the kind of companies best suited to the projected business environment, along the whole gas supply chain. To this purpose we look forward to a productive interaction with the Task Force of Gas Market Integration and with PGC A (Sustainable Development).