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Introduction

Surging growth in the global gas trade – underpinned by the shale revolution in the United States and the rise of liquefied natural gas (LNG) – continues to accelerate the transformation of global gas markets. Although talk of a global gas market similar to that of oil is premature, LNG trade has expanded substantially in volume since 2010.

As a result, gas is more accessible today to a variety of market players, and is more responsive to short-term changes in supply and demand across regions. In recent years, policy efforts to combat air pollution have been a key driver of natural gas demand growth in emerging economies in Asia.

Outlook by scenario

Gas demand by region and scenario, 2017-2040

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Gas production by region and scenario, 2017-2040

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In the New Policies Scenario (NPS), natural gas demand in 2040 has been revised up by almost 100 billion cubic meters compared with last year’s outlook. The bulk of the revision is due to China, where gas demand grows rapidly, reflecting strong policy efforts to improve air quality. Developing economies in Asia account for half of the total demand growth through to 2040.

The United States accounts for 40% of total gas production growth to 2025, after which sources of growth become more diverse as US shale gas production flattens and unconventional gas production from other regions picks up. Low-cost US production keeps Henry Hub prices relatively low until the mid-2020s, but increasing levels of global LNG trade eventually begin to narrow the gap between regional prices.

In the Sustainable Development Scenario (SDS), gas demand continues to grow to 2025 before flattening out at around 4.2 trillion cubic metres. Gas is the only fossil fuel for which demand in 2040 is higher than today, and it becomes the largest fuel in the global energy mix.

The dynamics are different from those in the other scenarios. Gas demand for power generation declines as gas increasingly provides peaking and balancing power rather than baseload generation. Instead, gas increases its share in the industry and transport sectors, where there is a strong impetus to curb the use of more emissions-intensive fuels.

In more carbon-intensive systems where there is ample scope to displace coal, such as India, gas demand is higher than in the NPS. In Europe and North America, demand remains stable to 2025, but declines after that, reflecting improved efficiency in buildings and industry, and more rapid decarbonisation of power.

Highlights

Net gas imports in selected regions, 2017-2040

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Unlike other fossil fuels, natural gas continues to make inroads in almost all advanced economies. In the United States, ample availability of gas at affordable prices fosters gas demand growth. In Korea, gas demand increases as the use of nuclear and coal in the power mix declines.

 

In the NPS, China soon becomes the world’s largest gas-importing country, with net imports approaching the level of the EU by 2040. China today is also on the verge of surpassing Japan as the largest LNG importer.

Share of natural gas in the energy mix by sector in emerging Asian economies, 2017

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Although the region is often dubbed “emerging Asia” as a whole, it is difficult to generalise about its gas demand. Gas has been a niche fuel in some markets (such as India) while it is well established in some others (parts of Southeast Asia, Pakistan and Bangladesh).

Changes in gas demand by region and scenario, 2017-2040

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Gas demand grows in most parts of the world in the NPS, but there are strong regional variations in the SDS. While gas use comes under pressure from the expansion of renewables and from strong energy efficiency policies in many advanced economies, emerging Asia remains a key source of demand growth to 2040.

Global liquefaction capacity, existing and approved, compared with requirements in the New Policies Scenario, 2010-2040

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The pickup in new LNG project approvals in the second half of 2018 suggests that the risk of an abrupt tightening in gas markets around the mid-2020s may be easing. However a steady flow of additional projects would still be required to meet demand in the NPS.
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