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Market and economy

The excess of supply compared to demand, coupled with falling gas prices in all parts of the world in the last three years, have caused the convergence of prices among the individual markets, including an impact on gas prices in the EU. In 2016, the average price of gas on the EU wholesale markets was approximately double that in the US, and the price of gas with the next month supply condition at the most developed hub, European TTF, was on average less than 15 EUR/MWh. The difference between the gas price on the European gas hubs and the average price of Russian gas supplied to the Czech Republic tended briefly during the year in favour of both parties, and was 4 EUR/MWh at most. The price of gas both produced and imported to Europe is increasingly more dependent on the market mechanism based on the relation between supply and demand. Nevertheless, there are still significant differences among individual European regions. In Central Europe, although gas prices are still affected by crude oil prices, this applies to only one third of the volume of gas traded now. The physical and trading interconnection of the Czech market with the German one allows almost perfect correlation of Czech wholesale market prices with prices in the area of North-West Europe. The liberalization of the gas market is also reflected in increasing trades in the short-term gas market in Europe. This situation is partly triggered by an increase in the utilization of gas power plants. An example is the situation on the trading platform of the Market Operator, when 3,747GWh of gas was traded on its intra-day gas market in 2017 (which is an increase of 79.4% compared to 2016).

European natural gas spot markets

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Medium-term horizon

The fact that the Norwegian contract was not renewed in 2017 will not be reflected practically in the composition of the gas imported to the Czech Republic. Two sources will remain dominant: Russia and the EU. Their mutual ratio will be affected primarily by the price of gas. In the outlook to 2022, relatively low gas prices on European markets may be anticipated (for Russian gas, too), thanks to the availability of LNG on global markets. However, toward the end of the examined period, the price of LNG will begin to grow gradually. Investments in the Czech gas industry over the medium-term horizon up to 2030 will be connected primarily to the renewal of technologies and the increase in the security of supplies, and will not depend greatly on the development of gas consumption. The necessary investments in the gas industry are almost identical in the individual case studies and are approximately CZK2015 150 billion for the period between 2018 and 2030.


Long-term horizon

In the outlook from 2030, the level of investment in the gas industry will depend on the degree of utilization of natural gas in the new areas of CHP, electricity monoproduction, CNG and LNG in transportation, and therefore also on the development of total gas consumption. The total necessary investment in the gas industry between 2018 and 2050 is CZK2015 500 billion in the Conceptual case study, CZK2015 400 billion in the EU – Energy Savings case study and CZK2015 475 billion in the EU – Low-Emission Sources case study. The costs in this range consist of the anticipated investments of operators in the transmission and distribution systems and the gas storage facilities, along with the investments of extraction companies.