Strong Asian demand will keep LNG supplies tight in the European Union until 2015 at least, when new capacity upstream comes online in Australia, in particular, delegates at the Flame gas conference in Amsterdam heard Monday.
"It's a tug of war between the two markets," said Howard Rogers of the Oxford Institute for Energy Studies.
Thereafter, though, the situation becomes a lot cloudier. Rogers questioned the "green" mantra in the EU that the price of gas will inevitably go up.
"We think prices will be uncertain, but in either direction," he said. This uncertainty comes from political confusion in the EU, said Total's head of LNG supply, Guy Broggi.
"In Asia, energy planning is done by governments or companies very close to governments, so they can do a 20 year contract deal with oil indexation to guarantee supply. But in the EU and the US, the future belongs to the trading community."
He also pointed to the contradiction between what the European Commission intends to bring about with its energy policy road maps, while individual countries within the EU have retained control over their energy policies.
This causes confusion when pipelines can have 40 year lifespans.
"Long term contracts imply that gas has a future, which may not be the case," he said.
But there is a lot of gas looking for a market: Shtokman, Yamal, Gulf of Mexico, Angola, and not all of that will go to Asia, "despite what the sponsors say."
The head of strategy at GDF Suez, Denis Bonhomme, said that the EU was the market of last resort.
"We see the short term market getting tighter. The EU will need supplies on top of Russian gas," he said. That implies LNG, but there is uncontracted production, and also uncertainties over EU objectives on decarbonization its power sector, he said.
Decarbonizing has contributed to the growth of renewables in Spain, which in March redelivered to Asia most of its LNG cargoes.
But it redelivered one to Fos, on the French Mediterranean coast. the owner was said to be Gas Natural, a major LNG customer, which has customers in France. Getting the gas from Spain to France by pipeline is difficult owing to capacity constraints.
