In its latest report, the International Energy Agency (IEA) has stated its belief that the ‘golden age’ of gas is set to expand to China over the next five years.
In its ‘Medium-Term Gas Market Report’, the IEA claims that the projected near-doubling of Chinese gas demand through 2019 will compensate for a slight slowdown in growth in many other areas of the world.
The annual report sees global demand rising by 2.2%/year by the end of the forecast period, compared with the 2.4%/year rate projected in last year’s outlook.
LNG will meet much of this demand, with new pipelines also playing a role. Private-sector operators in Australia, Canada and the US are taking the lead in the expansion of LNG trade, which is expected to grow by 40% to reach 450 billion m3 by 2019. Half of all new LNG exports will originate from Australia, while North America will account for around 8% of the global LNG trade by 2019.
IEA Executive Director, Maria van der Hoeven, said: "We are entering the age of much more efficient natural gas markets, with additional benefits for energy security […] While demand growth is driven by the Asia-Pacific region – and especially China – supply growth for the international gas trade is dominated by private investments in LNG in Australia and North America.”
Maria van der Hoeven continued: "High LNG prices are threatening to crimp demand as many countries are increasingly unwilling, or unable, to afford these supplies – and that could open the door to coal.
“Looking ahead, unless we see timely investment in new production and LNG facilities and the reversal of the recent cost inflation of LNG, only a very strong climate policy commitment could redirect Asia’s coal investment wave to gas."
The report added that gas is emerging as a major part of the solution to air quality concerns in China. The power, industrial and transport sectors will drive overall Chinese gas demand to 315 billion m3 in 2019, an increase of 90% over the forecast period. While China will remain a significant importer, half of its new gas demand will be met by domestic resources, most of them unconventional: Chinese production is set to grow by 65%, from 117 billion m3 in 2013 to 193 billion m3 in 2019.
In contrast to the dynamic growth projected in Asia, the report paints a starkly different picture in Europe. Due to low power demand growth and robust policy support for renewable energy, European gas consumption will not recover to its 2010 peak over the next five years. Moreover, there will be no meaningful diversification of European gas supplies through the end of the decade, according to the report.
The report said that despite abundant geological resources, the Middle East will struggle to achieve its full production potential – with some countries even experiencing gas shortages. The main reason for this is unrealistically low regulated gas prices that hinder upstream investment and encourage wasteful consumption.
Adapted from press release by Callum O'Reilly
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