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International Energy Agency Predicts Natural Gas Prices To Fall


By Charles Recknagel, RFE/RL

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 International Energy Agency (IEA) says the world is facing an oversupply of natural gas and predicts gas prices will fall in coming years.

The Paris-based IEA says in its annual World Energy Outlook, published today, that global gas supplies are rising faster than demand.

The report states 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 onstream." It says weakening demand is a consequence of the global economic crisis.

Equally important is an unexpected boom in North American gas production, thanks to new drilling techniques, which is expected to contribute to a glut in supplies.

The report says that by 2015, for example, there will be a dramatic overcapacity of gas pipelines and liquefied natural gas (LNG) terminals.

The agency predicts that the oversupply of gas will be even greater if countries press ahead with plans to save energy and develop more renewable electricity and nuclear power.

Depend Upon Exports

The report says that environmental policies alone could reduce demand for gas by 5 percent by 2015 and 17 percent by 2030 compared with a business-as-usual scenario.

Some of the countries most likely to be affected by a falling market for natural gas are Russia, Iran, and Qatar.

The three countries, which control the world's biggest gas reserves, depend upon gas exports for major portions of their foreign revenues. They also have invested heavily in infrastructure to move increasing amounts of gas to market in coming years.

The IEA, an autonomous agency linked to the Organization for Economic Cooperation and Development (OECD), advises 28 industrialized countries about energy supplies and the global energy market. Its reports are influential in helping many of the world richest states set their energy policies.

The report notes that market demand for gas in the EU will continue to rise in the coming years but the increased will be much less than previously thought.

That would be a setback particularly for Russia, which for the past 25 years has been Europe's single biggest gas supplier.

A drop in demand would erode the power state-controlled Gazprom has accumulated over both consuming and transit countries in the region in recent years.

It also could complicate Moscow's financial situation at a time when it is already reeling from the global economic crisis

The World Bank separately predicted today that the Russian economy will contract 8.7 percent in 2009.

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