Gas prices to remain high, investment needed, says IEA

Soaring demand, high oil prices and a “delayed supply response” from exporting countries have driven up natural gas prices in the past 18 months, according to the International Energy Agency (IEA), which warns that the situation is unlikely to improve in the short term.

Insufficient investment in new gas field and supply infrastructure like pipelines are a major part of the problem, the Paris-based agency notes in an 18 September press release announcing the publication of its 2008 gas market review.

The review examines the policies and approaches of 40 major gas producing and consuming countries, and provides an assessment of gas market trends over the next five to seven years.

“Investment uncertainties, cost increases and delays continue to be a major problem in most gas markets and are continuing to constitute a threat to long-term security of supply,” warns IEA Executive Director Nobuo Tanaka in a statement.

The situation is made worse by the decision of many countries to build new gas-fired power stations to reduce CO2 emissions from electricity generation. This means that “consumers are being hit with high oil, gas and electricity prices in quick succession,” warns the IEA, suggesting that greater use of Liquefied Natural Gas (LNG), which can be transported by tankers to and from a range of countries, could help to ease the situation.

In addition, “countries must take care to ensure a diverse power sector, keeping all options on the table, including renewables but also nuclear and coal,” according to Tanaka, who concedes that the “environmental performance” of coal based power generation must be improved.

The IEA made similar recommendations in its November 2007 World Energy Outlook, which calls for a radical shift in investment towards cleaner, more efficient energy technologies (EURACTIV 07/11/08). The EU in particular should invest more in “clean” technologies such as carbon capture and storage (CCS), Tanaka told EU leaders during a visit to Brussels in September 2008 to present the IEA’s first review of EU energy policy (EURACTIV 05/09/08).

The EU is scrambling to address the challenge of rising energy demand, particularly as relations with Russia, the bloc’s main gas supplier, have become increasingly frayed following the August war in Georgia. Brussels wants greater access to non-Russian gas suppliers, including Nigeria (EURACTIV 18/09/08). 

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