With South Africa moving to materially raise the profile of gas in its energy mix – probably initially through the importation of liquefied natural gas (LNG) – the International Energy Agency’s (IEA’s) latest ‘World Energy Investment Outlook’ makes for interesting and sobering reading.

The agency agrees that LNG is poised to play an important role in the globalisation of gas markets, with over $700-billion in LNG infrastructure to be created by 2035. However, it also cautions that gas transportation costs could dampen prospects for “much cheaper gas supplies”.

Executive director Maria van der Hoeven says expectations that a surge in new LNG supplies will “totally transform gas markets” need to be tempered by recognition of the high capital costs associated with LNG infrastructure and transportation.

LNG transportation typically accounts for about half of the cost of gas delivered over long distances, which could be up to ten times higher than moving an equivalent amount of coal or oil around the world.

“Understanding the scale of this investment in new liquefaction facilities and LNG tankers, and what this means for the costs of delivering LNG, should help to provide a realistic assessment of the price at which future LNG will be available,” she argues.

She, thus, questions “expectations in some places” that new supplies from the US will result in the exportation of not just US gas, but also US natural gas prices, which were a fraction of those in Europe and Asia.

The report has been published ahead of the release of the South African Department of Energy’s Gas Utilisation Master Plan, which could be made available for public comment during the course of this month.

The document has reportedly been designed to offer a framework for future gas infrastructure investment decisions, while also interrogating both sources of demand and supply. The importation of LNG into key coastal ‘gas hubs’ has been included as an option.

The IEA’s focus on the significant costs of investment in new liquefaction facilities is suggestive of a possible slower rate of gas-market globalisation. Overall, though, the agency believes gas investments will continue to rise and that LNG facilities will create new links between markets and improve the security of gas supply.