IEA gives warning of global gas shortage

The world's leading energy watchdog has warned of a looming global gas shortage unless more money is poured into investment.

The Paris-based International Energy Agency said the fuel would take a more dominant role over the next decade and supply must be expanded to match it. It said that while consuming countries could consider building up emergency stocks, this would not be "a silver bullet".

The comments, made in the IEA's second annual Natural Gas Market Review published yesterday, follow similar warnings last year. "While the 2006 review expressed concern about insufficient investment, we are even more worried this year and see it as the major threat to secure affordable global gas supplies over the medium to longer term," said the IEA executive director Claude Mandil. "Cost increases and delays are hitting investment hard in many places, and this phenomenon is not limited to a specific producing region."

The IEA called on the governments of its 26 member countries, which include the UK, to streamline regulation, improve market functioning through greater transparency and increase domestic production. It also advocated a more efficient use of gas and a diversification of supply sources and routes.

"The northern hemisphere winter has been very mild, temporarily reducing gas demand and disguising the underlying tightness of the market. But gas remains vulnerable and expensive," Mr Mandil added.

British gas and power prices have been rising this week, driven by reduced gas flows. Imports through the Norwegian and Dutch pipelines have dropped sharply in response to maintenance work and lighter summer contracts. But forecasts for gas demand are higher than usual for the time of year.

Rob Laughlin, an energy broker at Man Financial, said British Gas and Powergen were unlikely to pump millions more pounds into investment until they had a clear idea of the Government's future energy policy, including its plans for renewables.