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Natgas exporter group sees no need to cut output
June 1, 2011 / 9:54 PM / 7 years ago

Natgas exporter group sees no need to cut output

* Japan crisis, emerging market demand soaking up gas

* IEA, late in 2010, forecast oversupply for a decade

By Edmund Blair

CAIRO, June 1 (Reuters) - Members of a major gas exporters group said on Wednesday there was no need to consider cutting output of natural gas and any extra supply in the market would soon be consumed by growing demand.

Rising output of shale gas from the United States in the past few years had added to plentiful supplies and helped keep prices relatively low, but that dynamic has started to change.

Demand from emerging markets has reduced excess supplies, and Japan has become more reliant on gas since the shutdown of some nuclear plants in the wake of the Fukushima crisis.

“Our assessment is that there is an economic recovery around the world, and there is an extra demand for natural gas,”Algerian Energy and Mines Minister Youcef Yousfi told reporters in Cairo.

“We don’t think that for the short term or even the medium term there will be glut, oversupply.”

He said the medium term meant “two to three years”.

He was in Cairo for Thursday’s meeting of the Gas Exporting Countries Forum (GECF), a developing but still loose collection of gas powers including Russia and Iran, the world’s top two reserve holders, and Qatar, the biggest exporter of Liquefied Natural Gas (LNG). Algeria and others are also members.

Although GECF members have said they do not seek to create a forum like OPEC to influence commodity prices by raising or lowering output, consumers are nervous they could increase control over the gas market.

Asked if the group would consider cutting output to prop up prices, Yousfi said: “It is not on the agenda.”

Russian Deputy Energy Minister Anatoly Yanovsky echoed this, adding he had long said the GECF “is not a gas OPEC.”

“Gas and oil markets are quite different, and this is why no one tries at our meetings to regulate the market by quotas or by some cuts. It has never been the subject of discussion.”

Asked whether he believed the market was balanced, Yanovsky, who was speaking through a translator, said:

“Now it is the buyer’s market ... How long will it last? No one can say. But always the buyer’s market gives way to the seller’s market. In the long run, there is... balance.”

Bank of America Merrill Lynch said in a report that the global gas glut would soon vanish because of rising opposition to nuclear power in the aftermath of the Fukushima crisis and a dearth of new supply.

As recently as late last year, the International Energy Agency had been forecasting that capacity would outpace supply and stay above demand for a decade.

Unlike oil markets, long-term contracts are a major feature of natural gas trade, making short-term supply cuts to influence prices more difficult. Ministers said such contracts would remain and would help ensure development of additional supply.

“We think these long-term contracts are absolutely necessary in order to make more investments in upstream for natural gas, exploration and production,” said Yousfi when asked about the future of long-term, oil-indexed contracts.

Yanovsky said: “I do not think that the long-term contracts in the gas industry sphere will be broken down.”

He added that such contracts would ensure development of infrastructure and new exploration. (Reporting by Edmund Blair; editing by David Sheppard and David Gregorio)

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