Gas industry's worst year

Paris - The global gas industry, battered by the economic downturn, is likely to suffer a 4.8% slide in production in 2009, its worst performance in 40 years, an industry association warned on Thursday.

Cedigaz, a natural gas information body, said demand for gas was expected to fall by 5.0% to 6.5%.

Under the association's most pessimistic projection, gas consumption is not likely to surpass its 2008 level until 2014.

The study predicted that production should nonetheless pick up in 2010, albeit at a reduced rate - 1.8%-2.4% - when compared with previous years.

Gas volumes carried by pipelines have fallen 10%-15% this year, largely due to a sharp drop in consumption in the Commonwealth of Independent States, formerly the Soviet Union.

"In 2009, some countries increased their investment in LNG (liquefied natural gas), notably because it is more competitive than gas carried by pipeline because of lower prices," Cedigaz chief economist Armelle Lecarpentier told a press conference.

"This creates numerous uncertainties for big pipeline projects that in my opinion, given the general climate, will suffer delays."

In the light of environmental constraints, natural gas is likely to play an increasingly larger role in the global energy mix from 2012.

The Cedigaz study found that the economic crisis had triggered price upheavals that have weakened the link between gas and oil prices.

The development reflects increased production of non-conventional gas in the United States and an over-supply of liquefied natural gas.

"This new price configuration does not appear to be sustainable over time and raises questions about the practice of indexing the price of gas to that of oil in long-term European and Asian contracts," Lecarpentier said.

Countries that import natural gas do so through long-term contracts indexed to the price of oil.

- AFP