In an 87-page report to clients issued Monday titled "Global Natural Gas--Battlefield Analysis," the analysts said demand growth would gradually eat into the surplus, returning the currently disrupted relationship between spot gas and oil-indexed contract prices to normal levels by 2014.
"2010 is likely to be seen in retrospect as the point at which the European gas market came under maximum pressure," the analysts wrote. "New sources of supply will begin to be required between 2016 and 2018, such that any near-term disincentivisation of investment could exacerbate an end decade up-cycle."
With demand estimated to grow at 1% to 2% a year, the analysts said Europe would compete with Asia for marginal LNG and the marginal dollars of Gazprom capital expenditure.
The shift places the Russian gas giant as an integral link in the direction that the European gas markets will take.
New pipeline gas supplies from western Russia are key in filling the gap, the report said. "For Russia to make a contribution toward closing the supply shortfall in Europe, ...we need to have confidence that new supply options can be progressed toward production by decade-end."
Globally, growth in Chinese demand and Australian supply looked good for Asian markets, though, as strong demand and monopoly buyers would push prices to around twice what gas will fetch in the US and Europe.
In the US, supply overhang is expected to keep prices depressed in the near-term, with 2011 forecast to be at $4.50/MMBtu.
China Chemical Weekly: http://news.chemnet.com/en/detail-1411716.html
