UPDATE 1-IEA sees gas glut lasting until 2020

Tue Nov 9, 2010 12:13pm GMT
 

* IEA expects gas glut to last until 2020

* Cheap gas threatens oil-indexed contracts, renewables

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By Daniel Fineren and Muriel Boselli

LONDON, Nov 9 (Reuters) - Global oversupply of gas is set to rise above 200 billion cubic metres (bcm) next year and capacity is likely to exceed demand for another 10 years, despite rising gas use, the International Energy Agency said on Tuesday.

"The gas glut will be with us 10 more years," IEA chief economist Fatih Birol told Reuters in an interview.

All IEA scenarios forecast gas demand will increase, but it said that demand would take until 2020 to absorb swelling global gas supplies, which are due largely to a surge in North American shale gas and liquefied natural gas production (LNG).

"The glut of global gas supply capacity that has emerged as a result of the economic crisis ... the boom in U.S. unconventional gas production and a surge in liquefied natural gas capacity could persist for longer than many expect," the IEA said in its World Energy Outlook 2010 published on Tuesday.

Qatar, the world's biggest liquefied natural gas producer and exporter, said in early November it expected gas demand to match supply before the middle of the decade. [ID:nSGE6A00G3]

A year ago the IEA, energy adviser for many of the world's largest industrialised economies, said it expected the global gas glut to hit 200 bcm by 2012-2015, up from 60 bcm in 2007.

The IEA said it expected global demand to resume an upward trend this year and that continued oversupply could pressure exporters to move away from oil-indexed gas pricing, resulting in cheaper gas and stronger demand than currently projected.

Cheap gas for power production could also limit investment in renewable energy technologies, especially in Europe and the United States. [ID:LDE6A80XG]

LONGER TERM

In the longer term, the IEA expects the use of gas to rise much faster than any other fossil fuel, with a projected 44 percent increase in global demand from 2008 to 2035 under the outlook's base case scenario.

China is expected to make up about a fifth of the global increase in the volume of gas consumed, with its appetite for the relatively clean fossil fuel potentially higher still if China takes a tougher line on cutting carbon emissions.

Nuclear power is seen increasing its share in the global energy mix from 6 percent to 8 percent, while renewables are expected to double to 14 percent of primary energy supply.

For IEA oil outlook click: [ID:nLDE6A70SK]

(Editing by Jane Baird)

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