IEA said that many important aspects needed for the uptake of natural gas are already in place. Today’s price levels are very much in line with those in the “Golden Age” analysis, while China has reserved a strategic role in its energy policy for gas.
However, at least outside the US, the natural gas sector has not always been so optimistic. Demand has slowed considerably; lower prices squeezed revenues; traditional business models have been questioned without anyone being sure what will take their place; and the competitive landscape has become significantly more complex.
These are issues that the World Energy Outlook analyzes in four chapters.
China and other new markets are the future
China alone accounted for nearly 30% of global growth. This shows a change in the Chinese economy away from energy-intensive industrial sectors as well as a move towards cleaner energy sources, with both trends benefiting natural gas.
In the New Policies Scenario to 2040, global natural gas consumption will expand at an average rate of 1.6% per year to 2040, lower than the estimated 3% achieved in 2017 but a much higher rate than oil and coal. More than 80% of this growth takes place in developing countries, led by China, India and other countries in Asia.
Gas is no longer the main growth opportunity
In the WEO analysis, power generation is no longer the main projected growth area, despite the fact that this is the largest gas-consuming sector worldwide. Only where gas prices are expected to be very low, like the US, Russia and parts of the Middle East is it commercially viable for gas plants to run at high utilisation rates and provide baseload power.
In the New Policies Scenario, the largest increase in gas demand comes from industry. Where gas is available, it meets industrial demand, and competition from renewables is more limited
Competitiveness is important
Gas consumers experienced in 2017 vast and relatively low-cost supplies, highlighting that it is crucial that suppliers keep the cost gap to alternative fuels as narrow as possible. New projects and exporters are increasing the range of potential competition. Destination-flexible US exports are reducing the rigidity of LNG trade. More and more gas is being priced on a basis that reflects the supply-demand balance for gas, rather than the price of alternative fuels.
Two key attributes of gas come strongly into discussion:
- Versatility: Gas can play multiple roles across the energy system in a way that no other fuel or technology can match, generating power, heat, and mobility.
- Environmental dimension: Natural gas does produce nitrogen oxides (NOX), but emissions of the other major sources of poor air quality, particulate matter and sulfur dioxide, are negligible. The combustion of gas releases some 40% less CO2 than the combustion of coal and around 20% less than the burning of oil.
The prospects for natural gas will be determined by how it is assessed by policy-makers and prospective consumers against three criteria: is it affordable, is it secure, and is it clean? In each of these areas, there is homework for the industry to do, to keep costs under control, to ensure adequate and timely investment, and to tackle the issue of methane emissions. If the answers to these questions are positive, then gas can make a persuasive pitch for a place in countries’ energy strategies.