Credit crisis threatens gas markets: industry

By Svetlana Kovalyova

CERNOBBIO, Italy (Reuters) - The credit crisis may threaten the security of gas supplies and hinder new investments in the sector after hitting confidence in gas trading, according to participants at an international energy conference.

"The effect of the credit crisis on new capital-intensive export projects will be material for security and diversification of supplies," Domenico Dispenza, chairman of the Eurogas association, told the European Autumn Gas Conference at the lakeside town of Cernobbio in northern Italy on Tuesday.

The knock-on effects of the crisis were affecting both the European Union and its gas suppliers, highlighting their interdependence, Dispenza said.

Some energy companies, including Italian utility Enel SpA (ENEI.MI), have spoken about the possibility of cuts in capital spending to help address the effects of the credit crisis.

However, Europe's major project to diversify supplies by bringing gas from the Caspian region, the Nabucco pipeline, was pushing ahead despite the economic gloom, Stefan Judisch, a senior supply executive at Nabucco's partner RWE (RWEG.DE), told Reuters.

Dispenza, who is head of the gas division at Italian oil company Eni SpA (ENI.MI), said he saw a possible decrease in gas consumption in the next few years.

He said forecasting medium- and long-term gas demand would become increasingly difficult.

"The common wisdom of its unstoppable growth (of demand for gas) is being challenged by two full years of decrease, the combined effects of mild weather, marginal fuel competition and efficiency measures," he said.

TRUST AND LIQUIDITY ISSUES

Gas traders at the conference lamented that the crisis had drained liquidity from the market, short-term credit conditions had deteriorated significantly and reliable trading partners had become hard to find.

"All of a sudden, liquidity is the name of the game," said Stephen Asplin, managing director of NV NUON Energy and Trade Wholesale.

Energy traders have called for the need to restore the trust between market players and welcomed the launch of a gas bourse by France's energy exchange Powernext, due on Wednesday.

"We are convinced that it is the best way to restore some confidence in trading ... it's the best way to reduce a counterparty risk, a credit risk -- major issues for the next months and the next year in our community," said Philippe Vedrenne, managing director of Gaselys.

Gaselys, energy trading arm of France's GDF Suez (GSZ.PA), will be a market maker on the new gas exchange, he said.

(Writing by Svetlana Kovalyova and Stephen Jewkes, editing by Anthony Barker)