August 2012, Vol. 239 No. 8

Features

Natural Gas Expected To Show More Modest Rise In Demand

Kuala Lumpur, MALAYSIA–World gas demand grew from 2,939 Bcm in 2006 to 3,303 Bcm in 2010. This historic growth was by no means uniform: for example, Asia and the Middle East recorded the most impressive gains, whereas European consumption declined, according to a report released by Nexant Ltd., a London-based energy consulting company.

Looking ahead, forecast demand is expected to be more modest than recent historic levels, and equally uneven. According to Nexant’s forecast, global gas demand will reach 4,755 Bcm in 2035. This translates to a calculated annual growth rate of 1.7%, or just over half the 2006-2010 rate. The largest increases during the forecast period will be Asia, the Middle East, and Asia Pacific.

Global gas production also grew between 2006 and 2010, from 2,966 Bcm to 3,282 Bcm. North America accounted for more than 25% of global output, followed closely by the Former Soviet Union. The only region to record a decline in gas production growth during 2006-2010 was Europe, thereby underlining the growing importance of regional natural gas imports.

World production is projected to increase through 2035, to 4,757 Bcm. The FSU will reclaim from North America the title of “world’s biggest gas producer” around 2013, but North American output will continue to grow at a compound annual rate of 0.9% through 2035. This illustrates the importance of shale gas to North America’s gas supply mix. However, production in Europe is set to decline over the forecast period.

Gas infrastructure development is keeping abreast with forecast global gas supply and demand growth. Several major pipeline projects are currently under construction around the world: for example, North America is seeing a significant expansion in pipeline capacity to accommodate increased unconventional gas production; Phase II of the Nordstream pipeline will facilitate future Russian gas flows to Europe; and the Myanmar-China pipeline will augment a portion of China’s growing demand.

Then there are 583 Bcm of major pipeline capacity projects in various stages of planning around the world, all of which are targeting start-up dates within the forecast period. Over 40% of this capacity originates in the FSU, which highlights the continued importance of this region as a pipeline gas exporter to Europe and (increasingly), Asia. Meantime, world liquefaction capacity will also increase significantly over the forecast period, from 343 Bcm (2010) to almost 785 Bcm by 2035. The Asia/ Pacific comprises the lion’s share of the increase through 2020; after that, much of the increase is located in Africa, North America, and the Middle East.

Looking ahead, global pipeline gas trade will increase from its 2010 level of roughly 250 Bcm to over 395 Bcm by 2035. The FSU will retain its dominance over global inter-regional pipeline gas exports, but Africa and the Middle East will both increase their market shares as the global gas trade increases. By 2035, the FSU will account for more than 64% of global exports, down from its 2010 level of almost 70%, with Africa and the Middle East claiming respective shares of more than 18% and 11% by the end of the forecast period.

Global LNG trade will also record impressive growth, by almost 257 Bcm over the forecast period. The Middle East and Asia/Pacific will retain their dominance over global LNG sales, whereas Africa and to a much lesser extent, North America, will expand their positions as LNG export provinces by 2035. On the import side, Asia Pacific, Asia, and Europe are expected to dominate the scene with robust growth over the next 25 years. Asia/Pacific will remain the world’s largest LNG-consuming region through 2035, but its dominance will erode slightly as Asia and Europe’s requirements increase.