Salient to Investors:
Europe is missing out on the natural gas boom in the US and Asia, and instead burning coal imported from America. The IEA predicts global gas consumption to rise 19 percent by 2017 from 2010 on demand surges in Asia and the US – Europe will drop 1.6 percent.
In Europe, gas costs three times as much as in the US, so it prefers coal despite investing twice as much in renewable energy as the US since 2004. German power stations lose money from burning gas but profit from coal. UBS said European utilities will open six times more coal-burning plants than gas-fed units by 2015.
Anne-Sophie Corbeau at IEA says we are in the dark ages of gas in Europe and a golden age of coal.
Thierry Bros at Societe Generale said gas is too expensive for Europe, so with gas demand further down, the major producers will be compelled to agree to alternative pricing.
Hydraulic fracturing helped make the US the world’s largest gas producer last year, creating a glut.
John Mitchell at Chatham House said a golden age for gas may not prevail soon or everywhere, which would take each major region needing prices low enough to increase demand but high enough to increase supply.
Both Japan and South Korea rely on LNG for all their natural gas and face increased competition from China, which IEA predicts will quadruple its use by 2020. BP Statistical Review said Japan needs to replace the world’s third-largest nuclear fleet by 2040.
Fan Gao at Oxford Institute for Energy Studies said a higher population density and a fifth of the amount of water available than the US are major hurdles to China fulfilling its shale ambitions – environmental concerns could be a show-stopper as the Chinese becomes increasingly health and safety conscious.
Jonathan Stern at Oxford Institute for Energy Studies said the ‘golden age’ in Europe ended in 2008 when demand peaked, and has been in a downward spiral since so its renewables all the way.