IEA: Gas market "major transformation" being driven by new US supplies
According to the International Energy Agency's (IEA) Gas 2017 report, “the global natural gas market is undergoing a major transformation, driven by new supplies coming from the United States”, meeting growing demand in developing economies.
The IEA expects that global demand will grow by 1.6% a year for the next five years, with consumption reaching almost 4,000 Bcm by 2022, up from 3,630 Bcm last year, with China accounting for 40% of this growth.
“Demand from the industrial sector becomes the main engine of gas consumption growth, replacing power generation, where gas is being squeezed by growing renewables and competition from coal,” the IEA states.
The IEA states that the US will account for 40% of the world’s extra gas production to 2022, driven by its domestic shale industry, with US production to be 890 Bcm, more than a fifth of global gas output, by 2022.
The IEA states that more than half of the US production increase will be used for LNG for export, estimating that by 2022 the US “will be on course to challenge Australia and Qatar for global leadership among LNG exporters”.
“US LNG will be a catalyst for change in the international gas market, diversifying supply, challenging traditional business models and suppliers, and transforming global gas security,” the IEA states. “A new wave of liquefaction capacity is coming online at a time when the LNG market is already well supplied.”
Price formation and traditional business models are already being affected by the LNG glut, the IEA states.
“The US shale revolution shows no sign of running out of steam and its effects are now amplified by a second revolution of rising LNG supplies,” Dr Fatih Birol, IEA Executive Director, commented.
“Also, the rising number of LNG-consuming countries, from 15 in 2005 to 39 this year, shows that LNG attracts many new customers, especially in the emerging world. However, whether these countries remain long-term consumers or opportunistic buyers will depend on price competition.
“The environmental advantages of natural gas, particularly when replacing coal, also deserve more attention from policymakers.”