North America's natural gas supply gains are undermining some of the major exporting countries, which could disrupt investments in new infrastructure projects, the chief economist of the International Energy Agency (IEA) said Tuesday.

In a speech to the World Energy Congress (WEC) in Montreal, Fatih Birol told delegates that the unexpected gains from tapping into gas shales has boosted confidence in North America's gas reserves.

However, "there are also some losers from this gas glut, such as some key gas exporters that have lost market share...It is an uncertainty how those losing countries will react in terms of those investment decisions, especially in the upstream sector."

Speakers at the WEC have stressed that major infrastructure investments are needed now to meet the world's growing thirst for oil and gas (see Daily GPI, Sept. 14). Birol said if some countries were to delay investments in new infrastructure, it could lead to an energy shortfall in the coming years.

Gas is tracking to become the fastest growing fuel because of its abundance and smaller carbon footprint, Birol told the audience. Oil, however, should remain the major transportation fuel even if gas gains more market share in the power generation business, he said.

There is now an "insensitivity of oil demand and supply" regarding prices, and there will be no changes to patterns of energy consumption unless the marketplace pays the real price of energy, he said.

"This is crucial to understanding oil markets in the years to come...You need higher prices to slow down the oil demand growth when you compare the past couple of decades."

As conventional oilfields are depleted, producers will be looking for less accessible -- and pricier -- sources, Birol noted. "The bulk of cheap oil in the [industrialized] countries has been exploited, and what is left is deepwater offshore and the oilsands in Canada, which require higher price levels in order to be profitable."

Subsidies in the "major demand centers" have pressured the price signals. "Either we phase out those price subsidies and make price signals go to the consumers, or we need higher price signals."

©Copyright 2010 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.