NAturAL GAS MARKet REVieW 2009 Please note that this PDF is subject to specific restrictions that limit its use and distribution. The terms and conditions are available at www.iea.org/about/ copyright.asp INTERNATIONAL ENE R G Y A GENCY 2009 NAturAL GAS MARKet REVieW The global economic crisis has not spared the gas sector. Over the past year, we have moved from a tight supply and demand balance with extremely high gas prices to an easing one with plummeting gas prices. Since the last quarter of 2008, demand has been declining dramatically, essentially because of the global recession. Yet significant new volumes of liquefied natural gas will come on stream within the next few years, and the United States’ unconventional gas production has risen rapidly, with global consequences. It remains to be seen how these demand and supply pressures will play out, particularly in the pivotal power sector, in both OECD and non-OECD countries. Meanwhile, the security of gas supplies has once again become a critical issue, in particular in Europe after it experienced its worst supply disruption during the Russian- Ukraine crisis in January 2009. Moreover, the current market climate of weakening demand, lower prices and regulatory uncertainties added to the tough financial environment are likely to jeopardise investments, in particular in capital-intensive projects, further undermining long-term energy security in the most fundamental way when economies recover. The Natural Gas Market Review 2009 looks at these and other major developments and challenges in the different parts of the gas value chain in a selection of IEA countries – the United States, Canada, Spain, Norway, the Netherlands, and Turkey – as well as in non-IEA member countries in the Middle East, North Africa, Southeast Asia, and China. (61 2009 21 1P1) 978-92-64-06413-3 €100 -:HSTCQE=U[YVXX: NATURAL GAS MARKET REVIEW 2009 INTERNATIONAL ENERGY AGENCY IEA member countries: Australia INTERNATIONAL ENERGY AGENCY Austria The International Energy Agency (IEA) is an autonomous body which was established in Belgium November 1974 within the framework of the Organisation for Economic Co-operation and Development (OECD) to implement an international energy programme. Canada It carries out a comprehensive programme of energy co-operation among twenty-eight Czech Republic of the thirty OECD member countries. The basic aims of the IEA are: Denmark To maintain and improve systems for coping with oil supply disruptions. To promote rational energy policies in a global context through co-operative Finland relations with non-member countries, industry and inter national organisations. France To operate a permanent information system on international oil markets. To provide data on other aspects of international energy markets. Germany To improve the world’s energy supply and demand structure by developing Greece alternative energy sources and increasing the effi ciency of energy use. To promote international collaboration on energy technology. Hungary To assist in the integration of environmental and energy Ireland policies, including relating to climate change. Italy Japan Korea (Republic of) Luxembourg Netherlands New Zealand Norway Poland ORGANISATION FOR Portugal ECONOMIC CO-OPERATION AND DEVELOPMENT Slovak Republic Spain The OECD is a unique forum where the governments of thirty democracies work together to address the Sweden economic, social and environmental challenges of globalisation. The OECD is also at the forefront of Switzerland efforts to understand and to help governments respond to new developments and concerns, such as corporate governance, the information Turkey economy and the challenges of an ageing population. The Organisation provides a setting United Kingdom where governments can compare policy experiences, seek answers to common United States problems, identify good practice and work to co-ordinate domestic and The European Commission international policies. also participates in the work of the IEA. © OECD/IEA, 2009 International Energy Agency (IEA) 9 rue de la Fédération, 75739 Paris Cedex 15, France Please note that this publication is subject to specifi c restrictions that limit its use and distribution. The terms and conditions are available online at www.iea.org/about/copyright.asp Natural Gas Market Review 2009 • Foreword 3 FOREWORD 2008 was a year split almost neatly in two functioning markets. Such markets in the energy world - prices and demand can deliver fl exible supply and demand rose inexorably into early July 2008, only to responses quickly and effi ciently, as we saw see dramatic falls as the depth and spread during the hurricane-related gas shortages of the global recession became apparent. in North America in 2008 and before that The gas industry was not immune from in 2005. But the strong price signals that these pressures, and gas markets have markets deliver also encourage timely and seen arguably greater price falls than oil, adequate investment essential for long- continuing well into 2009. term security of affordable gas supplies. This is particularly important in European As in previous Natural Gas Market Reviews, markets, where although encouraging we remain concerned from a long-term progress was made in a number of areas, perspective about investment throughout market functioning remains weak. the gas value chain, in upstream production, processing, liquefaction, pipeline transport As we have learnt from oil markets, and interconnection, and storage. While greater transparency is an important fi rst 2008 saw some progress in all areas, and step to improved market functioning, as a major expansion of LNG capacity is well as assessing and managing energy underway globally, overall investment emergencies. We will continue to work with continues to be inadequate, and the next market players and member governments, years promise to be especially diffi cult, and co-operatively with the EU and other with falling demand and prices weakening organisations, in the important task of all producers’ cash fl ows, and fi nancing ensuring the market is well supplied with conditions becoming tougher in both timely, accurate and harmonised data. debt and equity markets. Regulatory While this will inevitably entail additional uncertainties continue to slow investment. effort by companies, governments and organisations to collect and disseminate Early 2009 also saw Europe’s biggest gas such data, I believe the time has come crisis. Gas security has been high on the IEA to make the efforts needed to raise the agenda for some years, following Ministers’ quality and timeliness of gas data. instructions in 2005 and 2007, to report more closely on gas market developments Growing interconnections among energy and to bring forward concrete proposals markets make dialogue between IEA on gas security for consideration by IEA member countries and other major member governments. We anticipate that economies more important than ever. Such Ministers will indeed consider a set of dialogue is most benefi cial when grounded principles and an action plan to enhance in areas of mutual interest. In this context gas security at their next meeting in our on-going dialogue with Russia and October 2009. The Russia-Ukraine crisis its largest gas company Gazprom, are I has given added momentum to this work. believe, especially important. One cornerstone of our efforts on This is the fourth Natural Gas Market gas security is the importance of fully Review. In conjunction with its sister 2009 OECD/IEA, © Natural Gas Market Review 2009 • Foreword 4 publication the Medium-Term Oil Market This review is published under my authority Review, it represents an important part as Executive Director of the International of our response to provide more medium Energy Agency. term analysis of oil and gas markets. As in previous editions, we welcome Nobuo Tanaka feedback. Gas issues will also be featured prominently in World Energy Outlook 2009, to be published in November this year. 2009 OECD/IEA, © Natural Gas Market Review 2009 • Acknowledgements 5 ACKNOWLEDGEMENTS The Review was prepared by the Energy Jane Barbiere, Madeleine Barry, Muriel Diversifi cation Division (EDD) of the Custodio, Rebecca Gaghen, Delphine International Energy Agency. The Review Grandrieux and Corinne Hayworth provided was designed and managed by Ian essential support to the Review’s production Cronshaw, head of EDD and the analysis and launch. Bertrand Sadin deserves a special was coordinated by Anne-Sophie Corbeau. mention for his continuous patience and heroic efforts in the Review’s preparation Signifi cant contributions were made from for printing. other colleagues in EDD, particularly Hiroshi Hashimoto, Wouter van der Goot, Mari The Review was made possible by assistance Vie Mæland, Nobuyuki Higashi, and also from the Governments of Belgium, Poland, Sara Piskor, François Nguyen, and Nasha and the United Kingdom; and GasTerra, Abu Samah. Contributors from the IEA Japan Bank for International Cooperation, included Tim Gould, Dagmar Graczyk, Isabel Petronas, Polish Oil and Gas Company, Murray, Sang Yoon, Christopher Segar, StatoilHydro and Tokyo Gas. and Brett Jacobs. Valuable comments and feedback were received from within the IEA, including Didier Houssin, and Aad van Bohemen. Timely and comprehensive data from Mieke Reece, Erica Robin and Olivier Lavagne d’Ortigue were fundamental to the Review. We would also like to thank Kieran McNamara, Miika Tommila and Maria Sicilia for their advice and support. 2009 OECD/IEA, ©