Prospects for gas supply and demand and their implications with special reference to the UK

Over the next 20 years the gap between gas consumption and production in We stern Europe will grow very substantially. Rising consumption and the need for further imports have implications for the provision of adequate infrast ructure and the contractual relationships between producers of incremental gas and European buyers. The required investment in both of these activitie s is taking place in an environment of market liberalization where the pace and extent of regulatory change is difficult to predict. The increased ris ks and continuous regulatory change make infrastructure-investment decision -making more difficult. As yet, there is no widespread agreement on the mos t appropriate incentive mechanism. The gas market risks and the higher cost s of developing gas fields in frontier areas will have to be reflected in t he characteristics of the contracts between producers and buyers. Price-ind exation clauses fully reflecting the evolving market conditions will be req uired.