PERTH (miningweekly.com) – A new report by the International Energy Agency (IEA) has shown that global gas demand will grow at an average rate of 1.6% a year, reaching just more than 4.1-trillion cubic metres in 2023.
This forecast compares with demand of 3.74-tillion cubic metres in 2017, the IEA noted in its ‘Gas 2018’ report.
“In the next five years, global gas markets are being reshaped by three major structural shifts,” said IEA executive director Dr Fatih Birol.
“China is set to become the world’s largest gas importer within two to three years, US production and exports will rise dramatically and industry is replacing power generation as the leading growth sector.”
Chinese gas demand is forecast to grow by 60% between 2017 and 2023, underpinned by policies aimed at reducing local air pollution by switching from coal to gas. China alone accounts for 37% of the growth in global demand in the next five years and becomes the largest natural gas importer by 2019, overtaking Japan.
The IEA report also forecasts strong growth in gas use in other parts of Asia, including in South and South-East Asia, driven by strong economic growth and efforts to improve air quality.
On the supply side, the US is expected to lead gas production growth to 2023, owing to the ongoing US shale revolution. Most new US supplies will be geared to export markets as liquefied natural gas (LNG) or through pipelines.
The IEA noted that the development of destination-free and gas-indexed US LNG exports would provide additional flexibility to the expanding global water-borne traded market.
For end-use sectors, industry will become the largest contributor to the increase in global gas demand to 2023, taking the lead from power generation, which had historically held this role.
The Gas 2018 report said that the change is especially marked in Asia and other emerging markets thanks to higher gas use in industrial processes and as feedstock for chemicals and fertilizers.
Overall, industry accounts for more than 40% of growth in global gas demand to 2023, according to the IEA, followed by 26% for power generation.
“While gas has a bright future, the industry faces tough challenges. These include the need for gas prices to remain affordable relative to other fuels in emerging markets and for industry to curb methane leaks along the value chain,” Birol said.
Meanwhile, LNG is progressively taking a larger share in global gas trade, especially in Asia.
LNG trade as a share of total gas trade was forecast to rise from one-third in 2017 to almost 40% in 2023, with emerging Asian markets accounting for about half of global LNG imports by 2023.
The IEA said that this continued rise in the LNG market would have significant impacts on trade flows, pricing structures and global gas security.
The report found that the current wave of LNG export projects would increase liquefaction capacity by 30% by 2023, and that this would be led by an increase in output from the US, which accounts for nearly three-quarters of the growth in total global LNG exports in the period, followed by Australia and Russia.
However, a lack of new LNG projects after 2020 could lead to a tightening of LNG markets.
The IEA said that given the long-lead time of such projects, investment decisions would need to be taken in the next few years to ensure adequate LNG supply beyond 2023.
Furthermore, price competitiveness would be crucial for gas to gain a firm foothold in emerging markets. This requires market evolutions and reforms, such as the development of trading hubs, opening up of the downstream to competition and fair access to infrastructure.
The report noted that decreasing air pollution would be a key driver of gas demand, especially in emerging markets, and industry’s ability to improve its environmental footprint, including by reducing methane emissions and expanding the deployment of carbon capture, utilisation and storage technology, would be critical for gas prospects.