The US shale gas revolution is unlikely to be replicated elsewhere in the world, and its international impact is most likely felt through an increase in liquefied natural gas supplies to the global market, the head of the International Energy Agency said on June 20.

Speaking in St. Petersburg, Russia, Executive Director Maria van der Hoeven said there were major obstacles that would impede the development of shale gas in Europe and China.

Paris-based IEA, made up of 28 member countries, is a resarch and advocacy group for reliable, affordable and clean energy, according to its website.

“The North American revolution will impact gas markets more by spilling exports onto the LNG market than by the spread of that revolution itself,” van der Hoeven said.

“The LNG market is tight and the extra supplies [from North America] will be welcome. It will enhance energy security,” she said. “The US is moving ahead, it will not take years and it will be a relevant LNG exporter.”

Van der Hoeven played down the potential of shale gas in Europe and Asia.

“China holds very large shale gas reserves, perhaps comparable to the US, but they are very difficult to access,” she said. “There are obstacles: complex geology, population density, water questions and regulatory impediments.”

She said China would overcome these challenges eventually, but through 2020, Chinese gas production growth would be dominated by other sources such as coalbed methane and tight gas, “but not shale gas,” said the IEA executive.

Van der Hoeven said that population density, regulatory obstacles and different geology means Europe won’t likely not mirror the shale gas revolution in the US.

Meanwhile, IEA estimated that global gas demand would grow at an annual rate of 2.4%, down from the 2.7% per year it projected in 2012. IEA blamed “persistent” demand weakness in Europe and production difficulties in the Middle East and Africa for the lower rate.

But the agency maintained that the “golden age” of gas is in full swing. “The next five years will be very important for the gas economy, in many countries it is a major fuel in power generation, but in the next five years we will see gas emerge as a major transportation fuel,” said van der Hoeven.

IEA said the use of oil indexation in long-term gas contracts was likely to be increasingly challenged in Asia and Europe as regional gas hub prices reach unprecedented levels of divergence.

In mid-2012, the discount of Henry Hub gas prices to Japanese LNG imports reached a record monthly average of $16 per MM Btu.

While most long-term contracts in Asia continue to be oil-linked, high LNG import prices have left some questioning the pricing mechanism and asking for alternatives.

The report also looked at whether the start of US LNG exports would be the “beginning of the end of oil-linked prices.”

Four US LNG export projects, Sabine Pass, Freeport LNG, Cove Point and Cameron LNG, have already signed long-term contracts based on Henry Hub indexation, mainly to Asian buyers.

“Such contracts could open up an opportunity for a new pricing scheme, challenging the traditional oil linkage,” IEA said.

“Even though there is no guarantee that Henry Hub prices will remain relatively low in the future, diversification of price schemes is also important for buyers to mitigate the risks of price fluctuation.”

This article appeared in the June 24 issue of Platts Inside Energy, which like ENR, is a unit of McGraw-Hill Financial