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IEA: China to Lead Medium-Term Natgas Demand Growth

Over the next five years China will more than double its natural gas consumption, while low gas prices continue to support the U.S. economy and the United States becomes a net exporter of liquefied natural gas (LNG), according to the International Energy Agency (IEA). However, a weak economy, growing reliance on renewables and relatively high natural gas prices will limit demand in Europe, IEA said.

In its "Medium-Term Gas Market Report 2012," which was released last Tuesday at the World Gas Conference 2012, IEA said China will become the third-largest importer of gas behind Europe and Asia Oceania, helping to drive a 2.7% average annual growth in global gas demand through 2017. This estimate is an increase from 2.4% growth predicted in the year-ago edition of IEA's annual report.

"During the period, North America will become a net LNG exporter, while Japanese imports will increase, although by how much will hinge on the country's nuclear policies," IEA said.

Low gas prices will result in gas generating almost as much electricity as coal in the United States by 2017.

According to IEA, one-quarter of new gas demand will come from China during the period, another quarter from the Middle East and other Asian countries together, and one-fifth from North America.

Global is expected to expand y 35%, driven by LNG and pipeline gas exports from the Former Soviet Union (FSU) region. Most of this expansion occurs from 2015 onward, following a period of further tightening of global gas markets. "Natural gas is the most important commodity with no global market price yet," IEA said. "Divergence among regional gas prices will decline but remain a feature of global gas markets. The emergence of a spot price in Asia would aid regional producers and buyers."

The report identifies other future sources of gas supply, with most incremental production coming from the FSU and North America. Further growth in unconventional gas will come mostly from shale gas in North America plus tight gas and coalbed methane production elsewhere. Shale gas developments in other regions are likely to be concentrated in China and Poland, IEA said.

IEA earlier this month released the report "Golden Rules for a Golden Age of Gas," which examined the environmental impacts of unconventional gas production over the next 25 years (see NGI, June 4).

"As gas competes against other energy sources in all market segments, notably in the power sector, pricing conditions are a key element to keep it competitive everywhere," said IEA Executive Director Maria van der Hoeven. "This medium-term report aims to facilitate investor decisions by providing a timely, in-depth analysis of the current trends and what we expect to take place over the coming five years."

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