‘Intense competition’ for European gas buyers expected as global glut continues

There will be “intense competition” for European gas customers in the coming years as the world continues to experience a glut, the International Energy Agency (IEA) has predicted.

With one of Europe’s largest capacities for the import of liquefied natural gas (LNG), Britain and its suppliers look set to benefit from lower prices in a buyer’s market.

In a report into the medium-term outlook for global gas markets the IEA said production in the US and Australia is “increasing robustly” off the back of a massive expansion in their LNG export capacities.

At the same time, it said, demand is decreasing from Japan and Korea, which together are involved in almost half of all global LNG trade. As a result “ample LNG supplies will look for a home elsewhere”.

The report noted that Europe has traditionally been the “outlet of last resort” for unwanted LNG supplies but said “weak demand growth and very low coal prices will limit how much gas the region can absorb”. “Intense competition will develop among producers to retain or gain access to European customers,” it added.

Britain has among the largest regasification capacities in Europe and is therefore in a prime position to take advantage of the increased competition for buyers.

Facilities with a combined annual capacity of 49 billion cubic metres (bcm) are currently in operation around the country, putting the UK second only to Spain (62 bcm) and well ahead of third place France (22 bcm operating and 13 bcm under construction).

The IEA said it expects global supply and demand to start moving towards equilibrium in 2017, but said it did not foresee the glut diminishing in a meaningful way before the end of the current decade.

Last month price reporting firm ICIS released a study claiming up to 15GW of new gas-fired plants could be built Britain over the next five years, as improving market conditions lead to a “comeback” for the fuel.