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High gas prices open door for coal

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World Coal,

In its recent medium-term outlook for the global gas market, the International Energy Agency (IEA) headlines with the prediction that the “golden age” of gas will spread from North America to China where it projects a near-doubling of gas demand through to 2019.

Competing in an age of cheap coal…

Look behind these headlines, though, and the story of gas’s rise to global domination is not as straightforward as it may appear. Indeed, the IEA actually revises down its forecast for global demand growth from the 2.4% per year of last year’s report to 2.2% per year. In her introductory address at the launch of the report, Maria van der Hoeven, executive director of the IEA, noted that – despite the projected growth in gas demand – “warning lights were flashing”.

"High LNG prices are threatening to crimp demand as many countries are increasingly unwilling, or unable, to afford these supplies – and that could open the door to coal," she continued. "Looking ahead, unless we see timely investment in new production and LNG facilities and the reversal of the recent cost inflation of LNG, only a very strong climate policy commitment could redirect Asia’s coal investment wave to gas."

… and growing renewable energy supply

Meanwhile, in Europe, economic weakness, growing supplies of renewable energy and ample cheap coal have contributed to a reduction in gas use on the continent: "Renewable energy capacity is growing at a faster rate than actual electricity demand in Europe and although some coal plants will close due to regulations, the ones that stay open will remain robustly competitive (to gas)," Laszlo Varro, head of IEA's gas, coal and power division, told journalists on a conference call.

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