‘Golden Age’ of gas coming to China

The International Energy Agency (IEA) has said that the ‘Golden Age’ of natural gas that is now firmly established in North America will expand to China in the next five years. In it’s Medium Term Gas Market Report, the IEA projected near doubling of Chinese demand through 2019 and suggested that this will compensate for a slight slowdown in growth in many other areas of the world.

Gas has emerged as a major 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. This represents an increase of 90% over the forecast period. While China will remain a significant importer, domestic resources - most of them unconventional - will meet half of its new gas demand. Meanwhile, Chinese production is expected to grow by 65% from 117 billion m³ in 2013 to 193 billion m³ in 2019.

The rest of the world

The report anticipates that global demand will rise 2.2%/y by the end of the forecast period, compared to the 2.4%/y rate predicted in last year’s outlook. The IEA indicated that LNG will meet much of this growth in demand. Trade in LNG is expected to grow by 40% to 450 billion m³ by 2019.

New pipelines are playing a role in a shift away from the traditional dominance of state owned suppliers; private sector operators in Australia, Canada and the US are taking the lead in the expansion of the LNG trade. Half of all new LNG exports will originate in Australia. North America will account for approximately 8% of the global LNG trade by 2019.

IEA Executive Director Maria van der Hoeven commented: “We are entering the age of 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 in private investments in LNG in Australia and America”.

However, despite the projected growth in gas demand and production, van der Hoeven indicated that high LNG prices are threatening demand. “Many countries are increasingly unwilling, or unable to afford these supplies, and this 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”, she said.

Europe

The report anticipates low power demand growth and robust policy support for renewable energy in Europe, hence European gas consumption will not recover to its 2010 peak over the next five years. The report further predicts that there will be no significant diversification of European gas supplies through the end of the decade.

Middle East

According to the report, 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 a press release by Emma McAleavey.

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