LONDON: Nearly 3 percent of global gas supply could be at risk of disruption in North Africa and the Middle East, according to investment bank Goldman Sachs. About 10 billion cubic meters/year of gas export capacity is already suspended between Libya and Italy. Goldman estimates that another 79 bcm/year, about 2.6 percent of global gas production, could be affected if physical disruptions resulting from violence in Libya spread to Egypt, Oman, Yemen and Algeria. "We believe that the potential disruptions of gas production in countries currently under social unrest are significant," Goldman Sachs analysts said in a research note. "In particular, disruptions from Algeria would be the most impactful to the market, as the country produces 2.7 percent of global natural gas supplies and it exports more than 60 percent of those volumes via pipeline to Italy and Spain or via LNG to the rest of the world." Russia has easily made up for the loss of Libyan gas supply into Europe — which imports nearly two thirds of all its gas needs — Spain and France are almost totally reliant on imports and Italy brings in over 90 percent of its gas. Goldman, which said on Feb. 24 that another disruption to oil supplies could create severe oil shortages, is similarly bullish on global gas supplies. "Even if Algeria were the only region to halt gas supplies ... we believe that global gas markets could face a negative supply shock," the note says. Goldman said that low gas stocks could mean some European countries have only a few weeks of reserves left, should supplies from Algeria and the rest of the Middle East stop. Current spare gas liquefaction (LNG) capacity and pipeline exports capacity for western Europe would not be enough to make up for all of Algeria and Libya's gas, it said. Goldman said that although UK NBP gas curve futures had risen since violence erupted in Libya in mid February, with WInter 2011/12 hitting 23 month highs on Monday on the back of strong oil prices, nearer-term prices had not risen markedly. "This indicates that UK natural gas markets are not currently pricing in any meaningful way the risk of near-term physical shortages," the note said. Although there have been muted anti-government protests in key European LNG supplier Qatar, and more widespread unrest in neighboring gas exporters Yemen and Oman, some analysts, including at the International Energy Agency, see low risk of gas exports across the Middle East being cut.
