August 22, 2012
Advanced Search
Home / Issue Archive / 2009 / September #9 / Forecast of Gas Glut Challenges Russia’s Hold on Europe’s Supply

№ 9 (September 2009)

Forecast of Gas Glut Challenges Russia’s Hold on Europe’s Supply

The world faces a natural gas glut that will cool prices, says the International Energy Agency, raising the prospect that Russia’s grip over Europe’s energy security will loosen.

By By Carola Hoyos, Chief Energy Correspondent

Share it!

Forecast of gas glut challenges Russia’s hold on Europe’s supply

By Carola Hoyos, Chief Energy Correspondent 

 The world faces a natural gas glut that will cool prices, says the International Energy Agency, raising the prospect that Russia’s grip over Europe’s energy security will loosen.In a draft version of its World Energy Outlook, to be published on November 10, the rich countries’ energy watchdog says that "global gas markets have evolved from a seller’s market, driven by tight supply and demand, to a buyer’s market as demand weakens while new supply comes on stream".

The oversupply of gas will be even greater if countries push ahead with plans to save energy and develop more renewable electricity and nuclear power.The IEA expects overcapacity of gas pipelines and liquefied natural gas terminals to reach at least 250bn cubic metres by 2015, more than four times the spare capacity in 2007. For the US, the gas glut will force companies to scrap plans for new LNG import terminals and mean that much of its existing capacity will be underused.

"Projected global demand points to significant under utilisation of inter-regional pipeline and LNG capacity around the world. This looming glut could have far-reaching effects on gas pricing," the draft states.An IEA spokesman said that the agency would not comment on the WEO ahead of its launch.A supply glut on the scale projected by the IEA would be a sea-change for an industry braced for shortages last year and be a significant blow to Russia, Iran and Qatar, which control the biggest gas reserves.

The projected over-supply would be a major setback for Russia’s state-owned Gazrprom. It would erode the power it has held over consuming and transit countries and would leave the company’s LNG ambitions unfulfilled before 2030.Russia will remain a significant exporter of gas to the European Union and the EU’s imports are expected to rise.However, the increase would be much less than previously thought and Europe is likely to have cheaper alternative sources of gas imports, particularly from North Africa and possibly the Middle East.

The watchdog says that environmental policies to limit carbon dioxide emissions to prevent global warming, far from supporting demand for gas, would cause gas demand to peak in the early 2020s. Industry executives have promoted gas as an low-carbon alternative to coal for power generation.Green policies hit demand, Page 10

Copyright The Financial Times Limited 2009 

Share it!
Copyright © 2008 Eurasia Press, Inc. (USA). All rights reserved.
Web programming by Iflexion
Copyright © 2008 Eurasia Press (www.eurasiapress.com)