Cedigaz: Worldwide gas demand to rise 1.4%/year during 2016-40

Global natural gas demand is expected to rise 1.4%/year between 2016 and 2040, with China leading the growth, according to a recent medium and long-term outlook for 2018 from Cedigaz, the International Association of Natural Gas, Paris.

Jul 3rd, 2018

Global natural gas demand is expected to rise 1.4%/year between 2016 and 2040, with China leading the growth, according to a recent medium and long-term outlook for 2018 from Cedigaz, the International Association of Natural Gas, Paris.

In Cedigaz’s reference scenario, which incorporates national energy plans and intended nationally determined contributions (INDC) commitments, gas will play a growing role in the energy mix at the expense of other fossil fuels. The expansion of gas markets is supported by both abundant and competitive resources, both conventional and unconventional, as well as a very rapid growth of spot and flexible LNG trade.

Demand

Energy efficiency gains will help curb the growth in global energy demand to about 26% between 2016 and 2040, while global economic output more than doubles. The transition to a lower carbon mix accelerates under Cedigaz’s scenario, with nonfossil fuels accounting for more than half of the incremental energy demand over 2016-40.

All markets transition to a more sustainable pattern of growth, but at a different pace. The strong differences in the current energy mix by region imply different trajectories of gas demand. Thus, gas faces challenges from coal-based power in India and Southeast Asia and from renewables in some markets in Europe and OECD Asia.

A stronger push for renewables and energy efficiency drives gas demand growth down to 1.2%/year over 2025-40 compared with 1.8%/year over 2016-25.

In absolute terms, gas records a volumetric gain of 1,214 million tons of oil equivalent over 2016-40, with industry (including chemicals) and power each accounting for 40% of the global growth, ahead of buildings (13%) and transportation (7%).

The largest contribution to the growth of gas-fired power generation comes from the Middle East, China, and Africa.

The Asian region accounts for 63% and 46%, respectively, of the incremental demand of energy and gas.

China and the Middle East lead the way in gas demand growth, accounting for 31% and 25%, respectively, of the incremental volume over the projection period.

Outside China, the largest growths in gas demand are recorded in India, up 120 billion cu m (bcm); Iran, up 119 bcm; the US, up 119 bcm; and Saudi Arabia, up 84 bcm.

Supply

The expansion of global gas supply will be driven by unconventional gas in North America and Asia, as well as conventional gas in Russia and the Middle East.

At the regional level, the largest production gains are expected in the Middle East, up 411 bcm; North America, up 352 bcm; and Asia-Oceania, up 305 bcm.

At the national level, the largest growths in volume terms are expected in the US, up 325 bcm; China, up 257 bcm; Iran, up 163 bcm; Russia, up 112 bcm; Qatar, up 85 bcm; and Saudi Arabia, up 84 bcm. The US consolidates its leading position and will maintain a share of 22% of global gas production.

Unconventional gas—including coal-to-gas and biogas—provides 62% of supply growth. Shale gas production accounts for 45% of the increase in gas supply, driven by the US, where shale gas output rises 2.7%/year over the outlook period.

North America continues to lead the unconventional gas revolution, although China and Argentina will experience marked production growth. Unconventional development elsewhere will be slow and concentrated in a few countries.

Trade

Interregional trade will account for an increasing share of global supply, driving the globalization of gas markets. Net interregional (long distance) trade is forecast to rise by 3.1%/year to 866 bcm in 2040 from 413 bcm in 2016.

Concerning imports, the share of Europe steadily declines to 38% from 63%, whereas that of Asia surges to 58% from 36%, underpinning a shift of trade flows from the Atlantic Basin to the Pacific Basin, which becomes more apparent after 2025.

The Commonwealth of Independent States will remain the leading exporting region, but its market share will decline. North America emerges as a large-scale exporter, covering 20% of total net interregional exports by 2040. The largest growth in interregional flows come from CIS’ exports to China and the US’s LNG exports to Asian emerging markets.

Interregional pipeline flows rise by about 2%/year. European dependence on extraregional imports grows to 66% in 2040 from 52% in 2016, with Russia and LNG playing a growing role to meet the supply gap.

LNG expands more rapidly than pipeline gas. The share of LNG in net interregional flows will progress to 55% in 2040 from 40% in 2016. Interregional LNG trade will rise by more than 4%/year.

China and India will together contribute more than 40% of the growth in international LNG imports.

Qatar is expected to remain the top LNG exporter, accounting for 21% of global LNG supply in 2040, closely followed by the US at 19%, while Australia keeps 17% of the market share. However, recent and future LNG importers and suppliers drive the diversification and globalization of gas markets.

Higher than previously expected Asian LNG demand, propelled by China, and delays in the second wave of LNG liquefaction projects bring a risk of tighter markets as early as 2022. It is estimated that 56 million tons of new LNG capacity, in addition to current operating and post-FID projects, is required to meet international LNG demand in 2025. The supply gap grows to 200 million tons in 2040.

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