WGC: Long-term gas consumption to rise under nearly all scenarios

July 9, 2018
Global natural gas consumption is projected to rise in the long term under virtually all major scenarios—including the most aggressive low-carbon transition—according to “Global Gas Report 2018,” released at the World Gas Conference by Snam, International Gas Union, and the Boston Consulting Group.

Global natural gas consumption is projected to rise in the long term under virtually all major scenarios—including the most aggressive low-carbon transition—according to “Global Gas Report 2018,” released at the World Gas Conference by Snam, International Gas Union, and the Boston Consulting Group. Forecasts also project gas to overtake coal as the second leading source of global energy consumption by 2035, behind oil. Most forecasters expect gas to grow from the current 22% to over 24% of the global energy mix by 2035.

Preliminary data suggest that in 2017, global gas consumption experienced its strongest growth in more than a decade at 3.7% year-over-year, more than double the average growth rate of the previous 5 years. Market liquidity and availability also increased thanks to the growing LNG market, up 48 billion cu m (bcm) or 12% in 2017 vs. an average of 1.6% during 2010-16.

The report highlights that, to continue strong growth, the industry must focus on three core levers:

• Cost competitiveness, especially given that more than three quarters of forecast demand growth by 2040 comes from non-Organization for Economic Cooperation and Development regions.

• Supply security.

• Sustainability.

With more than 90% of projected global gas consumption growth to 2040 also likely to come from cities, infrastructure investment estimated at $35-55 billion/year will be needed in developing countries, the report said.

China led 2017 consumption growth, accounting for more than 30% of global gas growth and nearly half of global LNG demand growth. Consumption also continued to increase in Europe, up 30 bcm in 2017 (and 83 bcm since 2014), led by Italy (4 bcm, 6%), Germany (5 bcm, 6%), and the Netherlands (3 bcm, 10%). Russian production rose 50 bcm in 2017, meeting most of Europe’s consumption increase.

High LNG demand matched rapid supply growth, according to the report, prompting an increase in LNG prices. Average Asian spot LNG prices increased $1.33/MMbtu from 2016 and were sustained above $10/MMbtu through winter 2017-18, despite 36 bcm of new supply, 60% of which came from Australia and the US.

Global gas trade growth accelerated to 9% in 2017 after expanding by 5.5% in 2016, both up sharply from the 2010-15 average growth rate of 1.1%. LNG trade grew by 12% (48 bcm) in 2017, up from an average of 1.6%/year 2010-16.

LNG consumption in new importing markets continued to grow in 2017. The report detailed that among the 12 countries that have started importing LNG since 2009—including Thailand, Pakistan, and Jordan—imports have increased to 43 bcm in 2017 from 9 bcm in 2013. At least five more are expected to start imports by 2021.

Liquefaction capacity grew by 38 bcm in 2017: up 13 bcm in Australia, 12 bcm in the US, 7 bcm in Russia (Yamal), with the balance coming from the rest of the world, including Malaysia and Indonesia (4 bcm combined).

Pipeline gas trade grew to Europe, within North America, and to China, boosting total global growth by 8%, the report said. European trade rose 11% from 2016, with most supplies coming from Russia and Norway. Expanded interconnections between Canada, the US, and Mexico increased North American trade by 10 bcm. Improved pipeline connectivity with Central Asia increased pipeline trade into China by 8% (3 bcm).