EU common natural gas market. Is that possible?

Author(s): Jose Maria Egea, Fernando Herrera

European Unions natural gas represents approximately 20% of the total world
consumption and is slightly less but comparable to the North American
demand. Despite the similar sizes of both markets, there are basic
differences between them:
while the North American market is considered a liquid, deep, price
homogenous and efficient market, the European one, formed by the union of
several national markets, with different infrastructures, planning criteria and
regulatory principles, presents many inefficiencies that question its
performance as a common market.
What will happen if there were a continuous interruption in a main supply
source? Or a failure in a transportation infrastructure or an entry point?
Are the European markets prepared to minimise the impact of such events?
These are some examples of the many incentives that exist to foster the
creation of a coordinated EU common natural market.
This paper tries to outline the current situation of the European gas markets
and the challenges that they face based on their expected evolution for the
next years. It also presents the benefits that an integrated market would
provide and how these could help to overcome the challenges ahead of the
European gas markets. Finally, some guidelines are suggested, mainly on
regulatory grounds, in order to put in place the foundations of an EU common
natural gas market.

19th WPC preprint paper. For delegate use only. Do not circulate.