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Natural Gas Demand Set to Grow more Slowly until 2018

Natural Gas Demand Set to Grow more Slowly until 2018

The Paris-based International Energy Agenda (IEA), founded in 1973-74 by the advanced industrialized countries in the wake of the Arab oil embargo, has published projections according to which the share of natural gas in the global energy mix will continue to increase, but more slowly than earlier believed due to European weakness of demand and problems in the Middle East and Africa with upstream production growth.

The IEA anticipates 2.4% annual growth over the next five years, lower than last year's 2.7% forecast.

However, the IEA does expect natural gas to continue its emergence as a significant transportation fuel over this period, challenging oil in the sector. The organization noted a tenfold increase in gas demand for road transport over the first decade of the present century, and said that the shale gas production boom in the United States together with concerns in China or air pollution and dependence on oil should help natural gas develop into a more mainstream transportation fuel.

Natural gas should represent as much as one-tenth of incremental energy needs in the transport sector between now and 2018, with its use in road transportation rising to 98 billion cubic meters (bcm) by 2018.

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This is in addition to its already major role in power generation.

Total world demand for natural gas is projected to increase by nearly one-sixth over the next half-decade to reach almost 4 trillion cubic meters.

For Russia to maintain its leading role on the world gas market requires development of infrastructure and industrial projects for large-volume exports to Asian destinations, even taking into account a modest recovery of Russian exports to Europe due to tight LNG supply.

China will be, as it is now, the main LNG demand driver, while the U.S. will drive the growth of supply. Europe's demand will increase only 2.3% from 513 bcm per year (bcm/y) this year to 525 bcm/y in 2018, but China's demand will nearly double to 295 bcm/y by then. Indeed, China is expected to account for nearly one-third of global growth in natural gas demand over the next five years. Indeed, China will increase its dependence on natural gas imports in spite of growing domestic production. China will absorb the whole production increase in natural gas in Central Asia over the next five years.

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On the other hand, U.S. shale gas development will represent more than one-fifth of global growth in gas production supply, as "nonconventional" gas production will remain mainly a North American phenomenon thanks to technological development, already skilled workforce, and established cost-efficient field services. Exploration in other regions continues, but is hindered by relatively poor infrastructure, environmental fears, and public opinion will continue to constrain shale gas exploration in other parts of the world.

By. Robert M. Cutler




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