Houston, 10 March 2010

The world big industrialised nations have agreed on the need to address the issue of natural gas supply security, but are not yet agreed that government-owned strategic stocks are the answer, the head of the West's energy watchdog said on Wednesday.

The revelation that Asian, European and U.S. governments have asked the International Energy Agency to focus on how to safeguard gas supplies is not surprising after several years of threatened and real disruptions in the flow of Russian gas to Europe, and the growth of the liquefied natural gas market.

But the fact that it is gathering views on the suitability of a government-owned strategic reserve -- potentially akin to the 1.5 billion barrels of oil reserves that it coordinates on behalf of member nations -- suggests it may be more advanced in thinking about how to address the challenge.

"Our ministers have asked us to do more work on gas supply security," Nobuo Tanaka, executive director of the Paris-based IEA, which advises 28 industrialised nations on their energy policy, told Reuters Insider television in an interview.

"In the short term, there may be a glut, but in the long-term, we are asking what kind of emergency measures may need to be taken."

Although stockpiling natural gas is more costly than oil, and many nations don't have the geological endowment of underground caverns that make it feasible, the idea is getting more thought from big consumers.

"Some private companies are already doing this for seasonal purposes, but the cost is very high and there's not yet a consensus that governments need to do it," he said.

"There is a consensus that we have to do something." Nobuo said while strategic stocks helped cushion the impact of supply disruptions in eastern Europe in 2009, it wouldn't be feasible for all countries to hold stocks.

The formation of the Gas Exporting Countries Forum (GECF) -- often seen as an OPEC for the gas market, with 11 members controlling nearly three-quarters of the world's proven gas reserves -- has only heightened unease in Europe, although it has yet to grow beyond a consultative group and experts say it would have difficult exerting an OPEC-like control on prices.

The question has become a distinctly European one over the past two years, as the revelation of vast shale gas resources in the United States has given the world's biggest consumer -- which was on the verge of becoming a significant importer just years ago -- decades of self-sufficiency.

"It's not a U.S. problem, it's a problem of Europe," he said. The issue goes to the heart of the IEA's mandate. Formed during the oil crisis of 1973-74, it was meant to help coordinate and safeguard members' oil supply security as a counterpoint to the growing might of OPEC.

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