gas outllook may help (including mpo)

Dash for gas may spark big price rise
Rowena Mason, London
June 8, 2011 - 12:16AM


Read more: http://www.theage.com.au/business/dash-for-gas-may-spark-big-price-rise-20110608-1frf0.html#ixzz1OdD1cnLm

ONLY six months ago, the International Energy Agency was warning that the world had a gas glut that would last until 2015.

Now the world's energy watchdog believes the oversupply has already begun to dissipate and may be gone well before 2015 if the world enters a "golden age for gas".

The agency said this week that a combination of factors made increasing demand more likely, with use potentially growing by 50 per cent before 2035.

The price of gas is still languishing at $US1.50 to $US2.50 a million British thermal units, 20 per cent lower than the IEA's previous forecasts, but the agency estimates the price will jump to $US9 by 2015.

The reasons behind a dash for gas include China's new five-year plan, which prescribes greater reliance on the fossil fuel, and safety fears about nuclear power after Japan's atomic disaster.

But the IEA warned that gas was not a panacea for the world's energy needs because supply was still vulnerable to disruptions.

Although gas produces only half the emissions of other fossil fuels, the IEA believes that over-dependence on the energy source would mean the world misses its targets of keeping the rise in world temperatures to below 2 degrees.

It warns that extra emphasis on gas should not crowd out renewable sources such as wind power.

The oversupply depressed the price of natural gas because of low demand in the recession and last year, with prices decoupling from the high oil price.

It was intensified because the US has doubled its gas reserves, after finding more shale gas. Gas has also become easily transportable by ship, rather than just through pipelines.

But the energy majors have pressed on with big gas projects such as Sakhalin in Russia and Gorgon in Australia, confident that world demand would return.

China is likely to become a major customer. It currently consumes as much gas as Germany but wants to be as big a consumer as the entire European Union to help reduce pollution.



Read more: http://www.theage.com.au/business/dash-for-gas-may-spark-big-price-rise-20110608-1frf0.html#ixzz1OdCyA4te