The global natural gas market is undergoing a major transformation driven by new supplies coming from the United States to meet growing demand in developing economies and industry surpasses the power sector as the largest source of gas demand growth. This evolution has far-reaching consequences on energy trade, air quality and carbon emissions, as well as the security of global energy supplies.
As explained, by 2022:
- global gas demand is expected to grow by 1.6% a year for the next five years, with consumption reaching almost 4,000 billion cubic meters (bcm) up from 3,630 bcm in 2016
- China will account for 40% of this growth.
- US production will be 890 bcm, or more than a fifth of global gas output
- Production from the Marcellus, one of the world’s largest fields, will increase by 45% between 2016 and 2022, even at current low price levels, as producers increase efficiency and produce more gas with fewer rigs
While US domestic demand for gas is growing, thanks to higher consumption from the industrial sector, more than half of the production increase will be used for liquefied natural gas (LNG) for export.
“The US shale revolution shows no sign of running out of steam and its effects are now amplified by a second revolution of rising LNG supplies,” said Dr Fatih Birol, the IEA’s Executive Director. “Also, the rising number of LNG consuming countries, from 15 in 2005 to 39 this year, shows that LNG attracts many new customers, especially in the emerging world. However, whether these countries remain long-term consumers or opportunistic buyers will depend on price competition.”
IEA also suggests that US LNG will be a catalyst for change in the international gas market, diversifying supply, challenging traditional business models and suppliers, and transforming global gas security. A new wave of liquefaction capacity is coming online at a time when the LNG market is already well supplied. This LNG glut is already affecting price formation and traditional business models – and attracting new LNG-consuming countries like Pakistan, Thailand and Jordan.
At the same time, this ample availability of LNG is also creating new competition with pipeline gas supplies, which could benefit consumers. This intense competition is loosening pricing and contractual rigidities that have traditionally characterized long-distance gas trade. The change will be accelerated by the expansion of US exports, which are not tied to any particular destination and will play a major role in increasing the liquidity and flexibility of LNG trade.
Europe could see growing competition between LNG imports and pipeline gas as domestic production declines, creating extra uncertainty on the sources of future supply. The recent standoff involving Qatar, which supplies about a third of the world’s LNG, and neighboring countries has also underscored potential risks to gas supply security.
Further details may be found by reading the report's executive summary: