October 6, 2009 / 12:22 PM / 10 years ago

UPDATE 2-Repsol bullish on LNG but sees gas glut to 2013

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BUENOS AIRES, Oct 6 (Reuters) - Spanish energy group Repsol YPF sees liquefied natural gas taking a greater share of the global fuels market, but warned of a glut that will depress prices through 2013.

Repsol (REP.MC) chief executive Antonio Brufau told the World Gas Conference on Tuesday that LNG would grow market share at the expense of other fuels like coal and gas exported by pipeline due to environmental concerns and demands for more flexible supplies.

But slower economic growth and the rise of unconventional gas sources not foreseen just a few years ago, such as shale gas, will put pressure on global gas prices and encourage a persistent overhang of LNG on the market for the next four years.

“Up until 2013 there will be a situation of excess supply. Thereafter demand will exceed supply unless new LNG projects that are currently awaiting the final investment decision are approved,” Brufau said.

The United States is expected to enter the winter heating season this year with record-high inventories.

Analysts have warned that a spate of new LNG projects due to begin production next year will likely cap the upside for U.S. gas prices even if the economy recovers.

Exxon Mobil Corp’s (XOM.N) gas and power marketing chief Tom Walters questioned in an interview with Reuters on Monday whether the global gas price rally was sustainable. [ID:nN05313413]

PRODUCERS MAY SUPPORT PRICES

However, Brufau said the growing role of national oil companies (NOCs) in the LNG business meant it was likely they could take action to support prices in the near term, similar to the way OPEC nations coordinate production cuts to bolster oil prices.

“The NOCs owning gas resources may decide to operate plants at below their potential top capacity, thereby regulating supply increases,” Brufau said.

“Altogether this represents a new dynamic in the LNG market which we must closely monitor.”

Brufau said the fact that LNG is priced against crude oil in Europe and Asia could lead to more gas flowing to those regions instead of the United States, where domestic prices are likely to remain weak. (Reporting by Robert Campbell and Edward McAllister; editing by Jim Marshall)

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