A looming glut in supplies of natural gas will trigger sliding prices and weaken Russia’s grip over Europe’s energy supplies, the International Energy Agency (IEA) said yesterday.
In its 2009 World Energy Outlook, the IEA said that the surplus in global supplies could hit 200 billion cubic metres per year by 2015 — equivalent to more than three years’ annual gas production from Britain’s part of the North Sea.
Fatih Birol, chief economist with the IEA, said that the glut was emerging because of slumping global energy demand amid the recession and booming American production of gas from “unconventional sources”, so-called “tight gas” and “shale gas”. New technology that uses hydraulic pressure to blast previously unreachable gas out of rock formations was driving a “silent revolution” in the US energy market, with “far-reaching implications” for the rest of the world. “This is a gamechanger that will put downward pressure on spot prices,” he said.
The United States is the world’s largest gas market, with annual consumption of about 653 billion cubic metres, but, until only two years ago, it was expected to have to import growing quantities of the fuel from overseas. However, production of unconventional gas in America has quadrupled since 1990 and now accounts for more than half of the total.
The IEA said that the trend had raised doubts about the wisdom of huge investments that have been made around the world in recent years in liquefied natural gas (LNG) production and transport. “Gas suppliers to Europe and Asia-Pacific will come under increasing pressure to modify their pricing terms and cut prices to stimulate demand.”
Mr Birol said that the glut would have a host of other effects and would “call into question Russia’s ambitions” to start selling LNG to other countries.
Britain is the world’s fourthlargest consumer of gas, after the US, Russia and Iran. The UK burns about 91.4 billion cubic metres of the fuel every year.
Fatih Birol, chief economist with the IEA, said that the glut was emerging because of slumping global energy demand amid the recession and booming American production of gas from “unconventional sources”, so-called “tight gas” and “shale gas”. New technology that uses hydraulic pressure to blast previously unreachable gas out of rock formations was driving a “silent revolution” in the US energy market, with “far-reaching implications” for the rest of the world. “This is a gamechanger that will put downward pressure on spot prices,” he said.
The United States is the world’s largest gas market, with annual consumption of about 653 billion cubic metres, but, until only two years ago, it was expected to have to import growing quantities of the fuel from overseas. However, production of unconventional gas in America has quadrupled since 1990 and now accounts for more than half of the total.
The IEA said that the trend had raised doubts about the wisdom of huge investments that have been made around the world in recent years in liquefied natural gas (LNG) production and transport. “Gas suppliers to Europe and Asia-Pacific will come under increasing pressure to modify their pricing terms and cut prices to stimulate demand.”
Mr Birol said that the glut would have a host of other effects and would “call into question Russia’s ambitions” to start selling LNG to other countries.
Britain is the world’s fourthlargest consumer of gas, after the US, Russia and Iran. The UK burns about 91.4 billion cubic metres of the fuel every year.
Source: The Times
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