THE global monitoring and control agency for energy affairs, the Paris based International Energy Agency (IEA) is predicting that massive increases in supplies of natural gas will lead to the world “swimming in gas” for another decade “as US domestic production surges and other nations ramp up their abilities to export gas as Liquefied Natural Gas (LNG)”.

The global glut of natural gas is expected to keep prices of the fuel depressed for at least a decade and threatens to railroad efforts to boost investment in renewable energy sources, the JEA said in its World Energy Outlook for 2010 — an annual forecast of energy supply, demand and consumption authored by the world’s developed nations including Canada and the United States published last week.

The revelation by the IEA should have significant implications for Jamaica, as the country seeks to shift a significant portion of its energy consumption to that source in a bid to lower increasing costs and increase the viability of local businesses to expand and generate new employment. Of added interest is the projection that the United States, Jamaica’s largest trading partner, might become a net exporter of gas soon.

Energy and Mining Minister, James Robertson has pinned his hopes on a turnaround in Jamaica’s high energy costs, particularly for electricity generation on LNG, which is to be introduced into the energy mix under a private sector-led project.

“The LNG option offers significant benefits to the country. It is important, for example, to point out that at the current differential between crude oil and natural gas prices, Jamaica would save at least US$300 million per annum on energy import costs, even after taking into account the cost of the infrastructure necessary to handle LNG,” Robertson noted in a recent interview.

“In this regard, the US$300 million per annum that we could now be saving if we had LNG, excludes the loss of earnings by the plants in the bauxite and alumina sector that had to cease or reduce operations owing to their inability to compete with plants elsewhere, due primarily to their use of oil as the main source of energy,” he added.

The IEA, whose mandate includes a focus on the “3Es” of sound energy policy: energy security, economic development, and environmental protection, is projecting that the demand for natural gas will rise, but it will take until 2020 to absorb the surplus.

“The gas glut will be with us 10 more years,” said IEA chief economist, Faith Birol in a Reuters report. It anticipates a “global oversupply of gas on the order of 200 billion cubic metres beginning next year,” according to a Reuters story.

That quantum is more than three times the excess supply that was available as recently as 2007.

The story notes that “even rising global gas use, which will increase faster than any other fossil fuel, won’t overcome a production surge that is emerging from shale gas resource development in the United States, and in Canada.”

Recent technological developments have facilitated the extraction of gas from shale reserves that hitherto were uneconomic to mine, greatly increasing the availability of gas. “Already, there are some signs of that change in the works. In the past month, more than 19 billion cubic feet of liquefied natural gas were shipped out of the Gulf of Mexico, about half the amount that will be imported to the region for the month of November,” according to Waterborne Energy, a Houston research firm. Given that just a year ago LNG terminals in the region didn’t have the ability to re-export the LNG they took in, this is a major turnaround.

As of late last week three tankers were waiting in the Gulf of Mexico outside Sabine Pass to load up with LNG that had previously been offloaded at Sabine Pass, Waterborne noted.

Meanwhile, the IEA also revealed that peak demand for crude oil globally “already came and went unnoticed in 2006 and the world should be prepared for a future of rising prices of the commodity”.

According to the IEA’s World Energy Outlook, released on November 9, oil demand will increase to 99 million barrels per day (mbd) by 2035, up from 84 mbd in 2009, driving oil prices over US$200 a barrel by 2035, which is equivalent to $113 in 2009 real dollars.