International Energy Agency says gas in golden age

A combined cycle gas plant at Citic Pacific Mining's Sino Iron magnetite iron ore project in the Pilbara region of Western Australia Australian firms are building gas plants to power industry

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Increasing gas supply and demand for the fuel could set off a "golden age of gas", the International Energy Agency (IEA) has said.

An IEA report claimed that demand for gas could outstrip coal by 2030, and get close to demand for oil by 2035.

The agency pointed to the uncertain future of nuclear energy as one of the main reasons for gas becoming so popular.

Growth in the sector would be led by China and the US, the IEA said.

"Ample supplies, robust emerging markets and uncertainty about nuclear power all point to a prominent role for gas in [the] global energy mix," the IEA said in a report.

Main drivers

China is endeavouring to use cleaner forms of fuel in the coming years, and that is likely to increase the demand for gas substantially.

"Worldwide, 16 of the 20 most polluted cities are in China, largely related from coal power plant production," said Fatih Birol of the IEA.

Start Quote

Europe is very densely populated so whatever you find is bound to be beneath a village or a town”

End Quote Christine Tiscareno S&P Equity Research

"For this reason, China is pushing for gas to replace a lot of coal power production," he added.

Mr Birol added that China currently uses nearly as much gas as Germany, but given the growth potential, its consumption may exceed that of the entire European Union by 2035.

As for the demand from the US, the IEA said that 60% of the country's coal power plants are expected to be retired in the next 20 years.

"There is a strong chance that a large proportion [of those coal mines] will be replaced by gas," said Mr Birol.

Nuclear and renewable risk

The report warned that the availability of plentiful and cheap gas in some parts of the world may undermine demand for renewable energy.

Gas "could muscle out low-carbon fuels, such as renewables or nuclear - particularly in the wake of the incident at Fukushima," warned IEA executive director Nobuo Tanaka.

The drilling rig of Cuadrilla Resources explores the Bowland shale for gas, four miles from Blackpool on January 17, 2011 in Blackpool, England. Drilling for gas in the UK has been suspended due to earthquake concerns

Whilst gas is cleaner to burn than oil, the IEA warned that burning gas instead of renewables would do relatively little to mitigate climate change.

The report suggested that under its gas scenario temperatures would rise by 3.5C.

Unconventional gas

New gas supplies are expected to come from unconventional sources, including shale gas in the US and coal bed methane reserves in Australia.

In its report, the IEA estimated that such unconventional reserves were now as large as reserves of conventional gas.

However, there are uncertainties about whether these unconventional reserves can be accessed around the world.

"It's very difficult, in particular in Europe," says Christine Tiscareno and oil and gas analyst at S&P Equity Research.

"France has already banned it. Europe is very densely populated so whatever you find is bound to be beneath a village or a town," she added.

European gas firms, such as Norwegian producer Statoil, have shale investments in the US - but do not yet see huge potential elsewhere in the world.

"As you move into more sort-of-frontier areas, of course there is a bigger question mark," said Rune Bjornson, Statoil's senior vice president for Natural Gas.

"It is early days in Europe still, and we don't necessarily think that it's ever going to be similar to what we see in the US."

Drilling for shale gas in the UK was recently suspended due to concerns about small earthquakes in the region.

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