Gas golden age darkens in Europe on U.S. coal: energy markets

Europe is missing out on the natural gas boom that is transforming energy use in the U.S. and Asia, instead burning cheaper, dirtier coal imported from America.

Global gas consumption may rise 19 percent by 2017 from 2010 levels as demand surges in Asia and the U.S. while Europe’s usage drops 1.6 percent, according to the International Energy Agency. Increasing coal-fired generation in Europe has cut gas demand by 3 billion cubic feet a day, according to Sanford C. Bernstein & Co., about 7 percent of consumption. The IEA last year predicted a golden age for the fuel with new exports from America to Australia.

European utilities’ preference for burning coal to generate electricity is pushing up carbon emissions even after the region invested twice as much in renewable energy as the U.S. since 2004. In Europe, gas costs three times as much as in the U.S., cutting competitiveness at industrial users such as Germany’s BASF SE, the world’s largest chemical maker.

“We are in the dark ages of gas in Europe and have some kind of golden age of coal,” Anne-Sophie Corbeau, an analyst at the IEA, said in an Oct. 9 interview in London. “We are looking at relatively rapid growth of gas demand in the world, but Europe doesn’t want to go in that direction.”

Gas for delivery next month on the Netherlands’ Title Transfer Facility, the mainland European benchmark, traded at 27.35 euros ($35.57) a megawatt-hour yesterday, more than double the price four years ago, according to broker data compiled by Bloomberg. That’s equivalent to $10.42 per million British thermal units and compares with $3.73 per million Btu for front- month fuel in the U.S., which fell 45 percent over the period. Gas for next month fell 0.6 percent to 66.93 pence a therm in London.

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