The future looks bright for gas suppliers

Gas will continue to expand it role in energy markets in the coming decades and will become a more globally traded commodity than ever before, world energy and geopolitics expert, Daniel Yergin predicts.
And gas giant Russia will play an increasingly important role in this scenario, he says: "Russia is a big player for Europe. Europe will be focussed on Russia, which has seen a quite dramatic slowdown in oil output," Yergin told in the Italian capital, Rome. He was presenting Italian energy giant ENI's sixth "World Oil and Gas Review" together with ENI CEO, Paolo Scaroni.

"We are entering a new period of relations between Russia and the world. The scenario is very different from 5-6 years ago. Everyone is taking another look at their strategy on gas. Europe is clearly placing a bigger emphasis on diversification," said Yergin, who is chairman of the Cambridge Energy Research Associates (CERA) and author of the Pulitzer prize-winning book “The prize: the epic quest for oil, money and power”.
"There is a re-think on energy security, in which Russia has a dominant role," said Yergin. The G8 meeting of the world's seven most industrialised countries (G7) plus Russia taking place in July the Russian port city of St Petersburg "will be much more about gas than oil," he said.

Russia has been taking an increasing tough stance in its dealings with the European Union. In January, a price dispute between Moscow and Ukraine briefly disrupted gas supplies to the EU, highlighting the block's vulnerability to foreign oil and gas providers and leaving it shivering at the first signs of Russian "energy imperialism".
Russia's Gazprom already supplies one-quarter of the European Union's gas, a figure predicted to rise in the next 10-15 years -- and it controls one-third of the world's gas resources.

Worldwide gas reserves grew 2.1 % and gas demand by 2 % in 2005, while world oil reserves and demand each increased 1.2 % over the same period, according to the ENI report. This was driven largely by a 1.8 % rise in Asian demand and a 5.1 % surge in demand in the Middle East, according to the report.
China is the world's second-largest oil consumer -- accounting for 6.6 mm bpd -- while India jumped from sixth to fourth place, with daily consumption of 2.6 mm barrels, the report said.

While gas production capacity declined in the OECD, demand rose 1 % in these countries, which made greater use of external sources of supply, both via pipeline and sea freight, the report said.
"Gas consumption is growing at twice the rate of oil. Gas is becoming an ever-more fundamental part of consumption patterns," Scaroni said, noting that ENI is Europe's number-one gas supplier. A problem for gas and oil offshore projects is the cost of investments: these have climbed 68 % since 2000, Yergin underlined.

Asked if Russia should fear the tiny emirate of Qatar -- which has the world's third largest gas reserves after Russia and Iran and is poised to this year become the world's largest liquefied natural gas (LNG)producer -- Yergin said: "Gazprom is a super major but Qatar has the high quality and speed of its decision-making and the ability to put deals together. It will provide one-third of LNG to gas markets."
"The interdependence of producer and consumer is evident with LNG - the resources flowing out are balanced by the financial liquidity they give companies," Yergin continued.

LNG exports have been rising by an annual 6.6 % since 2000 (and by 7.7 % a year since 2004), although less than 30 % of gas produced globally is exported, unlike the oil business, in which more than half of volumes produced are exported, the ENI report noted.
Commenting on current oil prices of around $ 70 a barrel, Yergin said: "High prices -- above $ 60 a barrel -- are a problem for the world economy to take into its stride. They now seem to be leaking into inflation and concerning central banks."

OPEC chief Maduabebe Daukoru said current fluctuations in oil prices are "detrimental to both producers and consumers" as they lead to uncertain future demand and lower investor confidence. OPEC would "do its best" to curb these price fluctuations, Daukoru said.
"There is no question that the security premium is the price of oil today. If we see a pathway towards diplomatic resolution on Iran, this will certainly have an effect on prices," Yergin said. He was answering a question on whether the international community's current standoff with Iran over its uranium enrichment programme was contributing to current oil price volatility.