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  • October 24th, 2014

Europe gas demand to stay weak until mid-2030, says IEA economist

Natural gas demand in Europe is likely to remain weak for almost two decades, according to the chief economist at the International Energy Agency, casting doubt on the continent’s ability to diversify its energy supplies and achieve climate change goals at an affordable cost.

“Current European gas consumption is back at where we were 15 years ago,” said Fatih Birolfrom the wealthy nations’ energy watchdog, adding that EU gas consumption would not regain its 2010 level until mid-2030. “I don’t see a bright picture for Europe’s natural gas sector.”

Europe, which consumed more than 500bn cubic metres of natural gas at its peak saw demand fall to 448 bcm in 2013. Analysts at Energy Aspects, a London-based consultancy, expect the level to fall to 420 bcm this year.

A weaker economy since the financial crisis, a push towards renewable energies and low coal prices compared with those for gas, Mr Birol said, were among factors to blame for the weakness of gas demand.

Lower carbon taxes that favoured the use of dirtier fuels and the shutdown of gas-fired power stations even as more coal-fuelled ones emerged had not helped either.

The IEA will give its detailed assessment on the European gas situation in its annual World Energy Outlook next month. But speaking at a Financial Times conference, Mr Birol said tough policy reforms would have to be enacted for any improvement to be seen.

Europe had already fallen behind in pushing gas as part of its energy mix, he said.

It is necessary for the continent, like the US, to secure cheaper supplies by pushing shale gas exploration. But the sector has come under fire in Europe for its perceived environmental risks.

Instead Europe has spent vast sums to subsidise renewable energy sources, such as wind and solar, as it seeks to reduce carbon emissions. But this has led to high energy prices for businesses and households.

Despite sluggish economic growth for the foreseeable future, and poor demand for energy-intensive goods, Mr Birol said gas could fill the vacuum left by a shift away from nuclear power by countries such as France and Germany, if political will allowed.

“Today nuclear energy is facing serious problems in Europe. A big percentage of existing nuclear plants are going to be retired in the next 20 years or so. There may be room for natural gas to fill the gap if price is competitive,” said Mr Birol.

Francis Egan, chief executive of energy company Cuadrilla Resources, who also attended the conference, said a reconciliation between the gas and renewables sector was necessary. The EU needed to work out where its energy would come from, he said. “If we don’t, the US and China are going to eat our lunch.”


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