TOKYO -- Prices have plunged to a 12-year low in the glut-plagued crude-oil market, and now market watchers are beginning to expect an oversupply in the natural gas markets.
Following the recent discoveries of huge gas fields in the Mediterranean Sea, coastal countries in the region are already thinking about exporting their future gas reserves to Europe. With Iran and the U.S. also pumping large volumes of the fuel, natural gas markets -- particularly those in Europe -- are on track to be hit by a protracted glut. But all that fuel sloshing around could be good news for gas-importing countries in other regions.
In late January, the leaders of Israel, Greece and Cyprus met in the Cypriot capital of Nicosia. They agreed to join hands in seven areas, including energy. Israeli Prime Minister Benjamin Netanyahu called the talks a "historic" achievement, saying it was the first time in 2,000 years that "Greeks, Cypriots and Jews sat around the table" together to discuss a common framework. The parties plan to export gas extracted from offshore fields in Israeli and Cypriot waters to Europe via Greece.
"Mega-class" gas fields recently found in the Mediterranean include the Tamar field in 2009 and the Leviathan field in 2010, both off the coast of Israel. Leviathan holds estimated reserves of some 20 trillion cubic feet. The discovery triggered a battle between the Israeli government and developers over interests in the fields. They eventually reached a compromise and have since begun preparing for eventual gas exports.
In 2011 the Aphrodite gas field, with estimated reserves of 5 trillion cubic feet, was discovered off Cyprus.
A massive field found in 2015 in Egyptian waters holds possible reserves of over 30 trillion cubic feet. Egypt plans to use gas from the Zohr field initially to satisfy its domestic needs. But experts say the country could very likely liquefy the gas and use it to become a competitive gas exporter in the future.
Meanwhile, Iran, home to among the world's largest oil reserves, sees big opportunities ahead. With Western economies having lifted their economic sanctions against the country, Iran is looking to resume its gas exports. A senior official at an Iranian state-owned company told the foreign media that the country plans to start exporting the fuel to Europe within two years.
In the U.S., natural gas stockpiles have swelled, supported by the shale gas boom there. To improve the supply-demand imbalance in the domestic market, the country appears to be preparing to launch gas exports as early as next month. The first shipment will likely be to Europe.
Europe relies on Russia for about 30% of its gas. But growing tensions with Moscow over the Ukraine issue have countries in the region seeking different suppliers. The supply from Russia has been stable so far, but expanding their import options would be an effective way to put Moscow on alert.
Higher expectations, declining demand
Although gas-rich countries have high hopes for selling their fuel to Europe, the fact is that Europe's shrinking economies are losing their thirst for gas. European gas consumption plunged about 20% from its recent peak in 2010 to 400 billion cubic meters in 2015.
Further weighing on gas demand in the region is the growing popularity of coal power generation, which has become increasingly cost-efficient. Natural gas prices on the London market have declined to the mid-$4 range per million British thermal units, less than half the recent highs in 2013. The entry of new players -- including Mediterranean coastal countries -- to the market may further push down natural gas prices.
If Iran, the U.S. and other gas-rich newcomers become tangled in fierce competition over gas exports, countries on the other side of the globe may be the biggest beneficiaries.
Japan, for one, may be able to import liquefied natural gas more cheaply. Currently, Japan's natural gas imports are based on long-term contracts under which it typically pays about 40% more than what European countries are charged. But according to Kazuaki Nagai, a researcher at Japan Oil, Gas and Metals National Corp., Japan may be able to gain leverage in price negotiations by suggesting it will seek different suppliers.