Novak: Situation on world gas market worse than in oil

The situation on the world gas market is more chaotic and complicated than on the oil one since it does not have such a regulator as OPEC, Russian Energy Minister Alexander Novak said in an interview with Handelsblatt.

According to him, in the gas production, there is a Forum of Gas Exporting Countries (GECF), which so far has not become a spokesman for the interests of the industry, nor its coordinator.

"The gas market, like the oil sector, has become very volatile. When prices fall sharply, investments are reduced, and when supply is reduced, prices stabilize. In the gas market, I hope the worst is over. Although the situation here is much more complicated since there are no regulatory bodies like OPEC in the gas sector and it is more challenging to coordinate the actions of different parties; therefore, the gas market is more chaotic. Some companies will go bankrupt, "the minister said.

Novak believes that in the gas industry, "investments will be reduced and production capacities will stop in countries having projects that cannot be implemented at current prices."

The Russian minister agreed that some projects in the USA would be closed: "Of course, I closely monitor the development of the situation in the United States, and of course, there are companies that will not withstand the current price level." Novak agreed with a previously voiced assessment by the International Energy Agency about a 4% reduction in global gas demand in 2020.

"The situation on the gas market, too (as well as on the oil market) is very complicated due to less demand associated with the coronavirus pandemic. Our experts believe that gas consumption will be reduced by 4%. Due to the last warm winters, forecasts regarding growth in gas consumption are already outdated. At the same time, many facilities are being built to liquefy natural gas - the market share of LNG is growing. But because of the collapse in demand associated with the pandemic, there was a large excess of LNG supply, and the prices on the spot gas market are also under pressure - prices fell by double digits," - the minister said.