IEA Downbeat on European Gas

The International Energy Agency believes the European natural gas market is unlikely to make any dramatic progress soon. 

The IEA said in its quarterly journal that European countries consumed 8% more natural gas in 2010, wiping out a 6% decline that coincided with economic crises in 2009. However, the IEA writes that the gain was "an illusion" because of colder winters. When adjusted seasonally, the IEA said gas consumption in some countries is at 10-year lows.

For the residential and commercial sector, the agency said modest population growth and energy-efficiency gains mean "the backbone of European gas consumption" is unlikely to post significant gains.

"Unless the European climate gets much colder... there is little hope for major gains in this sector," the agency said.

"Seasonally-adjusted gas consumption has actually lost 10 years of gains, and a few countries, such as the United Kingdom, are back to levels unseen since 1995."

The journal also acknowledges the powerful blow to gas markets caused by the global financial crisis. "Industry has never quite recovered from the economic crisis. Indices on production in manufacturing are below their 2007 levels in most European countries, which translates into lower energy consumption," the article says.

For the industrial sector, manufacturing and production levels are less than in 2007 for most European countries. These are also importing more coal as lower US gas prices mean exports are cheap. "Only an improved economic outlook or much lower gas prices would trigger a recovery in this sector and both look relatively unlikely in the medium term," according to the IEA.

See also: The 'Silver Age' of Gas in Europe?