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Tue 9 Nov 2010 04:01 PM

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Natural gas may enter 'golden age' on Chinese demand - IEA

Gas demand seen to return to growth this year after dropping in 2009 following the downturn, oversupply

Natural gas may enter 'golden age' on Chinese demand - IEA
GAS DEMAND: Global gas demand may surge as much as 44 percent to 2035 over 2008 levels, IAE says

Natural gas may enter a “golden
age” led by demand increases in China and the Middle East as new
gas-fired power stations are built, the International Energy Agency
said.

Global gas
demand may surge as much as 44 percent to 2035 over 2008 levels,
reaching 4.5 trillion cubic meters a year (435 billion cubic feet a
day) as China’s use grows an average 6 percent a year annually, the
adviser to developed nations said in its World Energy Outlook 2010,
published on Tuesday.

“China could lead us into a golden age for gas,” the IEA said. “Demand in the Middle East increases almost as much.”

Gas demand will
return to growth this year after dropping in 2009 in the wake of the
economic crisis and global oversupply, the Paris-based IEA said. Gas is
the only fossil fuel for which demand in 2035 is higher than in 2008
across all of the IEA’s three assumptions for climate legislation.

China produced
about 85 billion cubic meters of gas last year and consumed about 89
billion, according to BP’s Statistical Review of World Energy. More
than 70 percent of the country’s energy comes from coal, the most
polluting fossil fuel. The country has three operating LNG terminals,
with another 16 planned or proposed import facilities. It also imports
gas through a pipeline from Turkmenistan.

Middle Eastern
gas use is likely to grow almost as fast as in China, according to the
IEA. Still, the region may double its production to 800 billion cubic
meters a year by 2035.

More than a
third of the worldwide increase in production over the quarter century
is expected to come from so-called unconventional gas deposits of
shale, coal-bed methane and tight gas, the IEA said. Such production
will be concentrated in North America, spreading to the Asia-Pacific
region, the agency said.

                  

A “gas glut” in
supply capacity will exceed 200 billion cubic meters next year, from
130 billion this year, the IEA said, before starting “a hesitant
decline.” The agency defines the glut as the capacity of inter-regional
pipelines and LNG export plants minus the volume of gas actually traded.

“This glut will
keep the pressure on gas exporters to move away from oil-price
indexation, notably in Europe, which could lead to lower prices and to
stronger demand for gas than expected, especially in the power sector,”
the IEA said.

In Europe, most
gas is sold under multiyear contracts linked to the cost of crude and
oil products. Still, the fuel is increasingly traded at hubs and priced
independently from oil.

The IEA study
assumes nations implement broad policy commitments to climate change.
The organization also looked at a scenario assuming current climate
legislation and one that assumes steps to limit global warming to 2
degrees Celsius (3.6 degrees Fahrenheit).

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