The International Energy Agency (IEA) has launched a new report on the global gas market covering the period 2000 to 2010.

The report ‘Natural Gas Market Review 2006: Towards a global gas market’ assesses the rapid changes in the LNG industry, investments in the gas sector and the importance of the power sector for global gas demand.

In the next five years, says the study, global gas demand is projected to increase to 3.2 trillion m3, or 2.4% per year with a decrease in growth only likely to be felt after 2010, even if high gas prices persist.

On the demand side, investment is strong in the power sector with the overwhelming majority of new power plants in the OECD being gas-fired, while on the supply side, project developers are struggling to keep pace and projects are currently being postponed due to a lack of qualified personnel and high raw materials prices. This is expected to keep upward pressure on gas prices for the near future.

Claude Mandil, executive director of the IEA said: “The natural gas industry is changing at a rapid pace. Global natural gas demand is rising but OECD production is plateauing. This evolution means that import dependence of the EU and North America will grow.”

Mandil further stressed the growth in international trade and in particular the rising importance of Liquefied Natural Gas (LNG). The LNG industry currently constitutes only 6.5% of the gas market but is now an economic and competitive means of energy distribution. The traditional business model of the gas industry is changing as the flexibility of LNG ships increasingly allows sellers to bring gas to markets with the highest value. Consequently LNG is set to attract half of the sector’s investments, the IEA says. The rapidly growing LNG market-share already transfers price signals between markets as distant as Japan, Spain and the US. With the Atlantic LNG market set to equal the Pacific market by 2010, Mandil confirmed that “there is a definite trend towards a global gas market”.

Regarding security of supply Mandil said: “Russia has been a reliable supplier of gas to Western Europe for several decades and the IEA believes that Russia has both the willingness and the reserves to continue this role for the decades to come. Nevertheless, it is not clear where and when investments will be made to reduce the impact of declining production in its major existing fields. Both suppliers and consumers will greatly benefit from increased transparency in the Russian gas sector.”