BP chief economist Christof Ruehl told Reuters that a global gas business, whereby tankers ship liquefied natural gas (LNG) to areas of high demand, would benefit consumers by making prices more competitive.

Gas trade would also become less dependent on pipeline supplies in the long term should geologists unearth unconventional reserves, such as shale gas or coalbed methane, close to areas of high consumption.

"The old picture - three gas markets, Europe, Asia and North America, with no connection as far as prices are concerned - is breaking down," Ruehl said in an interview. "Every large gas exporter will have more of an uphill struggle."

The United States last year outpaced Russia as the world's largest gas producer for the first time since 2001, largely due to an unforeseen boom in shale gas production. Analysts say this, coupled with higher LNG output, could lead to a gas glut.

Ruehl said about 12% of gas produced in the Atlantic basin last year ended up in Asia, compared with zero in 2000. As spot trade replaces long-term contracts, pipeline gas will find it harder to compete in the long term, he said.

"The first big winner of the disappearance of long-term contracts will be the customer. It means lower prices," said Ruehl, who formerly represented the World Bank in Russia.

"The second winners would be those countries and companies where new gas resources become accessible. The third winners will be those companies that are flexible enough to get a head start."

Russia, which launched its first LNG plant last year on the Pacific island of Sakhalin, will have to respond. "Russia will be forced to price itself into consumer markets," Ruehl said.

While China, which shares a long border with Russia, should be a natural market for state-run gas export monopoly Gazprom , Ruehl said cracking this market would not be easy.

Natural gas accounts for only 4.5% of China's primary energy demand, he said, and Beijing is developing its industry at a time when unconventional gas and LNG trade are emerging.

"The Chinese are businessmen. What they are likely to do is to make use of this kind of flexibility at a time right now when LNG prices are very low."

Russia is the largest gas-producing nation within the 11-member Gas Exporting Countries Forum. A Russian, Leonid Bokhanovsky, is the organisation's secretary-general.

Asked about the prospects for the organisation - sometimes informally dubbed the "Gas Opec" - Ruehl said: "How do I recognise when we have a globally integrated gas market? I'll probably recognise it by the emergence of a cartel."

In oil markets, Ruehl said output cuts introduced in late 2008 by Opec had generally been very well observed. This means, however, there is plenty of capacity waiting to come on stream.

"We are in a world where you have excess capacity in Opec countries of about 6 million barrels per day. A little over a year ago, before the price spike, we had about 2 million barrels per day," he said.

Ruehl said average annual demand growth for oil between 2000 and 2007 was 1.1 million barrels per day.

"Even if the good years were to return tomorrow - which I think is very unlikely given the global economic situation - it would still take more than three years to burn through this excess capacity and go back to a market as tight as in 2008.

"That means, for the foreseeable future, it's very unlikely that we will see massive price spikes."

He said supply and demand fundamentals, not speculative capital, was always the driving factor behind oil prices.

"Financial investors... don't determine the direction in which the train is going. They jump on the train."

Published: 05 February 2010 08:51 GMT  | Last updated: 05 February 2010 09:36 GMT