Medium-Term Outlook for Gas Is Good After Doldrums
by: Research Recap May 05, 2009

While the gas market may be in the doldrums now, its medium-term prospects remain good as environmental policies favor further coal-to-gas switching in both developed and developing countries, according to Oxford Analytica. Security of supply concerns should also guarantee further expansion in LNG import capacity across a more diverse range of countries, a process boosted by the current low-price environment, OxAn says in Medium-term prospects are good for gas.


Demand for gas looks unlikely to recover until 2010, when cuts in supply and an expected bottoming out or recovery in industrial and power consumption bring the market back into balance from the supply glut it is currently experiencing.


However, in the long term, cheap gas prices will boost the attractiveness of gas relative to other fuels:

Tensions between Ukraine and Russia over gas supplies have heightened Central and East European countries’ awareness of the need for alternative gas import options and this is likely to result in new liquefied natural gas (LNG) terminals for a region that currently has no LNG import facilities.
Cheaper gas prices appear to be renewing the momentum behind developing countries’ LNG terminal building programmes, particularly in China, where increased gas imports remain an important element of energy policies designed to meet future demand and reduce reliance on coal.
As power consumption growth returns, lower gas prices should also add to OECD interest in gas-fired power stations. Gas is also likely to be a big winner from the expected US cap-and-trade scheme governing ‘greenhouse gas’ emissions.