Global LNG market to tighten in 2013/14: Shell

Royal Dutch Shell Head of CO2 Graeme Sweeney speaks during the Reuters Global Energy and Climate Summit in London, June 14, 2011.

LONDON (Reuters) - The nuclear power capacity reductions following the Fukushima accident will result in a tightening of the global gas market in the next two to three years, Shell said on Tuesday.

Following the major nuclear accident at Japan's Fukushima facility in March, Germany switched off around 7 gigawatt (GW) of nuclear power capacity and has decided to totally phase out nuclear generation by 2022, and other major economies are also reviewing their nuclear power policies.

For Japan, Asia's second biggest economy after China, the nuclear accident means it has begun to increase its imports of liquefied natural gas (LNG) to compensate for the lost nuclear generation.

"There is already some tightening in the gas market, and we will see a tightening of the LNG market in 2013 or 2014 based on increased demand in Asia and Europe," Graeme Sweeney, Shell's executive vice president CO2, said at the Reuters Global Energy and Climate Summit in London, adding "that is earlier than previously expected."

The International Energy Agency (IEA) watchdog said in a report last week the oversupply in the global gas market could end by 2015 as gas power generation increasingly replaces coal in order to reduce carbon emissions, and pushes back nuclear power as a result of the Fukushima accident.

Sweeney said the increase in global gas power generation would help secure the fast rising demand for energy, especially in emerging economies, but that this also made it important to make gas power generation cleaner in terms of carbon emissions.

"By 2050, probably 60 percent or more will still come from fossil fuel and that stresses why we need to deal with the emissions of those sources," Sweeney said, adding he saw carbon capture and storage (CCS) as the best way to make fossil energy supplies cleaner.

CCS is a technology that enables the separation of carbon from fossil power generation and storing it underground.

There are several pilot projects around the world but the technology is not yet commercially viable and also faces significant public resistance.

Sweeney said by 2050 around a third of the energy supply system would come from renewable sources, and "that is why gas and renewables makes a substantially smart investment set."

(Writing by Henning Gloystein; editing by James Jukwey)