The world faces a natural gas glut that will cool prices, says the International Energy Agency, raising the prospect that Russia’s grip over Europe’s energy security will loosen.In a draft version of its World Energy Outlook (WEO), to be published next Tuesday, the rich countries’ energy watchdog says 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 on stream”.The oversupply of gas will be even greater if countries push ahead with plans to save energy and develop more renewable electricity and nuclear power.In the report, the IEA expects overcapacity of gas pipelines and liquefied natural gas terminals to reach at least 250bn cubic metres by 2015, more than four times the spare capacity in 2007. For the US, the gas glut will force companies to scrap plans for new LNG import terminals and mean that much of its existing capacity will be underused.“Projected global demand points to significant under utilisation of inter-regional pipeline and LNG capacity around the world. This looming glut could have far-reaching effects on gas pricing,” the draft states.An IEA spokesman said the agency would not comment on the WEO ahead of its launch.A supply glut on the scale projected by the IEA would be a sea-change for an industry braced for shortages last year and be a significant blow to Russia, Iran and Qatar, which control the biggest gas reserves.
Implications of the glut are discussed further here. I also recommend reading a post from yesterday at Knowledge Problem. There is great uncertainty about the future of natural gas. Check out this projection:
Environmental policies would have a serious effect on gas demand, reducing it 5 per cent by 2015 and 17 per cent by 2030 compared with the business-as-usual scenario, the IEA concludes. If demand were to fall, the US would become largely self-sufficient and Europe would rely less on Russian gas, long an area of anxiety among European Union officials. ...... In the US, the situation is slightly different, says the IEA, mainly because of its large reserves of natural gas trapped in shale rocks. New technology that allows companies to break the rock and drill horizontally has opened up vast new areas of supply, helping to nearly eradicate the need for liquefied natural gas imports from abroad.
Natural gas appears to be the linchpin for American energy independence. Whatever the case, Pittsburgh is at the center of a very resource rich region (see Brookings release about money for cleaning up the Great Lakes). The city is strategically located between two major population corridors (Chi-Pitts and Bos-Wash). The proximity to those two globally prominent markets is a significant advantage. Leadership issues aside, I don't think anyone could over-sell the importance of the Marcellus Shale play.
Cheap energy is back.