Gas 2019

Analysis and forecasts to 2024
In this report

Natural gas demand grew at a remarkable clip last year, increasing by 4.6%, its highest growth rate since the beginning of the decade. Future growth will be more measured, supported by economic expansion in emerging markets – especially in Asia – and sustained policy support in the People’s Republic of China to battle air pollution. The supplies to meet that new growth will come from both new domestic production in these fast-growing economies but also increasingly from major exporting countries, led by the development of the abundant shale gas resources in the United States. International trade, supported by the strong growth in liquefied natural gas export capacity, will play a growing role in the development of natural gas markets as they move further towards globalisation. The recent convergence in market prices in major regions provides an indication of this increasing integration. However, establishing market-driven pricing mechanisms in fast-growing countries remains a challenge, albeit one that is being addressed by pricing reforms in several leading emerging economies around the world.

After another record year, global demand for natural gas is set to keep growing over the next five years, driven by strong consumption in fast-growing Asian economies and supported by the continued development of the international gas trade.

Gas 2019 explores changes underway for gas supply and demand, and other trends that are set to determine the evolution of the market over the next five years.

Key findings

Growing demand for natural gas

Demand for natural gas demand jumped by 4.6% in 2018, accounting for nearly half of overall demand growth. The United States led growth last year, with the switch from coal-to-gas responsible for nearly half of the increase. Weather also had a major impact on US gas demand, with a colder than average winter and hotter than average summer driving up demand in buildings and for power generation. Gas demand in China increased by almost 18%, as the country accelerated efforts to reduce local air pollution.

Average annual change in global energy demand, 2010-2018

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Gas demand in the coming five years is set to be driven by Asia Pacific, forecast to account for almost 60% of the total consumption increase to 2024. China will be the main driver for gas demand growth, though slower than in the recent past as economic growth slows, but still accounting for about 40% of total gas demand increase to 2024.

In the case of China, coal to gas switching and residential uses play a major role in growing demand, whereas power generation is to be the main driver in the Middle East. However it is the industrial sector that is expected to account for almost half of the increase in natural gas consumption globally, covering both energy for processes and feedstock for chemicals.

World natural gas consumption growth for selected countries and regions, 2018-2024

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The United States and China are the two largest individual contributors to supply growth to 2024, accounting together for over 50% of total production increase. However, production increases mainly to meet domestic market needs in many regions, and in some cases such as China or South Asia, cannot keep pace with the strong demand growth rate.

The development of exports is therefore further concentrated, with the United States, Australia and Russia accounting together for the vast majority of gas exports growth to 2024.

Contributors to natural gas production and export growth, 2018-2024

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Looking at LNG specifically, the market is set to undergo profound changes over the next five years. China and India emerge as major LNG buyers along with increasing imports to Europe. On the supply side, the emergence of a trio of leading exporters results in Australia overpassing Qatar in 2022, and being overpassed by the United States by 2024.

LNG exports for a selection of exporters, 2014-2024

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LNG imports for a selection of importers, 2014-2024

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While European gas consumption is set to remain almost flat in the coming years, domestic production is set to fall at an average rate of 3.5% per year, primarily driven by the Groningen phase-out in the Netherlands and declining production in the North Sea.

This structural decline in domestic production, combined with the expiry of several long term pipeline contracts, opens opportunities for new sources of supply, including LNG.

Domestic production and contracted pipeline vs import needs, Europe, 2014-2024

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Prices of gas markets in major regions are converging. Differences in regional prices have sharply decreased since the final quarter of 2018 (especially between Asia and Europe) thanks to well-supplied markets. But the Asian spot market still faces a higher degree of price volatility because of stronger seasonal patterns.

The expansion of the LNG trade is likely to encourage greater price convergence, while the debottlenecking of pipeline capacity in the Permian Basin is likely to keep low US gas prices in the future? However, in the absence of further investment in LNG capacity, the prospect of a tighter market would also imply a return to higher regional price differentials.

Evolution of natural gas spot market prices, 2014-2019

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