By Eric Watkins
LOS ANGELES, June 5 – Natural gas is headed for a bright future, according to a new report by the International Energy Agency (IEA) projecting China to more than double consumption by 2017, while the U.S. will continue to benefit from lower prices from the unconventional gas revolution.
According to IEA’s Medium-Term Gas Market Report 2012, China will become the third-largest gas importer behind Europe and Asia Oceania, driving a 2.7% average annual growth in global gas demand through 2017.
At the same time, North America will become a net LNG exporter, while Japanese imports will continue to increase, depending on the outcome of current debates over the country’s nuclear policies.
The robust projections came as IEA reported that world demand for natural gas climbed just 2% in 2011, saying it was “much lower” than recorded in 2010.
SLUGGISH EUROPEAN DEMAND
IEA said natural gas had been growing at 3% per year, attributing the correction to a mixture of low economic growth, higher gas prices, and mild weather.
Gas-fired plants were affected by “sluggish European power demand” and the “strong growth” of renewables, IEA said, noting that relatively high gas prices and extremely low CO2 prices led to increased competition from coal.
In the OECD Americas region, low prices boosted the share of gas in the power generation and industrial sectors, especially in the U.S., IEA said.
In OECD Asia Oceania, Japan led additional demand as a result of efforts to offset missing nuclear power generation following closure of the country’s nuclear industry following the Fukushima Daiichi disaster in March 2011.
POWER, INDUSTRY LEAD GROWTH
Outside OECD countries, IEA said that increased consumption of natural gas was driven by economic growth and increasing needs in both the power and industrial sectors.
It said gas markets grew strongly in Asia, the Middle East and Africa, but more moderately in Latin America and Former Soviet Union (FSU)/Non-OECD Europe.
Global gas supply increased by 93 bcm or 3% in 2011, reaching 3,375 bcm, with the increase coming largely from the U.S., Russia and Qatar.
Production of gas was marginal in non-OECD Latin America, and OECD Asia Oceania, while Europe’s gas production dropped 9.3% from 2010.
Unconventional gas represented 16% of global gas production as of 2011, and half of unconventional gas production came from tight gas despite the growing interest in shale gas.
Production increases in 2011 came mostly from North America, where shale gas continues to boom despite record low gas prices and the reduction in the number of rigs.
In addition to shale gas and tight gas, associated gas from light tight oil plays is also growing in importance, IEA said, noting that production from these three sources now “more than compensates” for the decline in US conventional gas production.
Over the medium term, unconventional gas production is expected to continue to expand, again coming primarily from North America, where US shale gas production continues to boom.
TRADE SHIFTING TO ASIA
Outside North America, IEA said tight gas and coal-bed methane (CBM) “will be the largest contributors” to incremental production.
In the Middle East, Africa and Latin America, tight gas could complement existing conventional gas, while CBM is projected to increase markedly in China and Australia.
IEA noted that the global trade balance is “visibly shifting” to Asia, which is now not only attracting increasing flows of liquefied natural gas (LNG), but also of pipeline gas.
Global LNG trade increased by 9.4% to reach 327 bcm in 2011, which represents a significant slowdown compared to the record 21% increase in 2010.
But the trade in LNG is still increasing faster than global gas demand, IEA said, adding that most of the additional LNG supplies went to Asian markets, notably Japan.
© Glamma Productions Inc. 2012