Despite projections of a supply tsunami on the international gas markets, a top executive of the global gas supplier BG is predicting that gas prices will more than double over the next two years. Elizabeth Spomer, senior VP, regional business development at BG, said despite plans for additional capacity from the Middle East, Northern Europe, North America, Africa and possibly Australia, the demand for fuel from the larger emerging economies such as China, Brazil, India, Russia, Korea and Japan would serve as a funnel to take up the excess capacity on the market.
“We are clearly in a buyers’ market today. The industry has capacity of just under 200 million tonnes per annum (mtpa). Another 100 mtpa now under construction is still uncertain, as high costs and limited construction capacity will delay commissioning.” Spomer said once this new capacity under construction was delivered, there would be a lull in the market as cost uncertainty, the lack of partner alignment, environmental issues and the tension between domestic use and exports, would prevent new greenfield or expansion supply projects from moving forward.
“Looking forward, geopolitical concerns and access to reserves will add to these uncertainties.” Spomer said recovering markets, coinciding with the delay in capacity growth, could produce a supply shock between 2012 and 2015. “Even if this gap in supplies doesn’t materialise, the next generation of projects will be more expensive than their predecessors for reasons of location, growing complexities of LNG projects and the availability of contractor resources. “All these factors undermine the likelihood that LNG will become a heavily discounted fuel in the future.” She noted that in the past, gas production and consumption were fairly localised within the hemisphere.
