After a 4% drop in 2020, natural gas demand is expected to progressively recover in 2021 as consumption returns close to its pre-crisis level in mature markets, says a new report by IEA.
According to the Gas Market Report, LNG remains the main driver of international gas trade, as the 2018-19 wave of investment in liquefaction projects delivers additional export capacity in North America, Africa and Russia.
LNG the main driver of international gas trade
Global LNG trade is expected to reach 585 bcm/y by 2025, an increase of 21% compared to 2019. Emerging Asian markets remain the driving force behind the expansion of LNG imports, led by China and India, while the United States accounts for almost all of the net growth on the export side. LNG trade is expected to increase at a slower rate than liquefaction capacity additions, thus limiting the risk of a tight market over the forecast period.
The Asia Pacific region further increases its share of total LNG imports, from 69% in 2019 to 77% by 2025. China alone accounts for 22% of total LNG demand in 2025, contributing almost 40% of growth in total imports over the forecast period. India also leads LNG growth accounting for about 20% of incremental trade, and sees its imports increase by 50% between 2019 and 2025 to support strong growth in demand. Bangladesh and Pakistan, two more recent LNG buyers, also experience strong import growth rates to support their increasing consumption and offset the decline of domestic production. South East Asian markets also increase their imports to supply the development of new import capacity in Thailand and Viet Nam.
Europe remains the main importing market after Asia, as LNG offers a source of diversification of supply in the context of declining domestic production. After reaching record levels in 2019, the region having played the role of balancing market to absorb oversupply, European imports are expected to return to an average of 90 bcm/y throughout the forecast period (25% above the average import level of the past five years). Contributions from other regions – Africa, Central and South America, the Middle East and North America – are expected to remain stable.
On the supply side North America is almost the sole source of growth, accounting for close to 80% of additional exports between 2019 and 2025. North American exports are expected to almost triple in the next five years, driven by the wave of recently sanctioned US liquefaction projects, as well as the commissioning of Canada’s first export project by the end of the forecast period.
Africa accounts for most of the residual growth in exports, sourced from projects under development in Mozambique (Coral FLNG, Mozambique LNG), capacity expansion in Nigeria (NLNG train 7) and a cross-border offshore project in Mauritania and Senegal (Tortue FLNG).
Russia’s LNG exports are set to increase by almost 20% by 2025, driven by capacity development from the Yamal peninsula. Supply from the Middle East should remain stable based on Qatar’s current1 export capacity, as are LNG exports from the Asia Pacific region, with Australian exports plateauing and output from traditional exporters such as Indonesia and Malaysia decreasing slightly.
Furthermore, if almost all regions are expected to contribute to the growth in natural gas production in the next five years, half of the net increase in supply comes from North America and the Middle East.
The sector’s ability to rebound in a post-crisis environment will be pivotal to deliver the incremental gas production needed by the US market to replace its declining conventional production and supply its additional LNG export capacity under development
IEA has also adjusted this year’s forecast to account for Covid‑19 resulting in expected global natural gas demand reaching over 4 370 bcm annually in 2025, or an average annual growth rate of 1.5% per year for the 2019-25 period, compared to initial forecast which assumed an average growth rate of 1.8% per year over the same period.
Even if most of the 2020 losses are to be recovered in 2021, the Covid‑19 crisis has longer-lasting impacts on natural gas demand growth. This results in about 75 bcm/y of lost growth over the forecast period – more than the equivalent of incremental demand for 2019
What is more, gas consumption by industrial uses is the main contributor to demand growth to 2025, increasing at an average rate of 2.5% per year and accounting for 40% of incremental consumption. Growth from the power generation sector is expected to average 1.3% per year during the forecast period.
Demand growth loses speed in mature markets as additions of renewables capacity further reduce the space for thermal sources, while the bulk of coal-to-gas switching has already taken place. In faster-growing markets, the role of gas in power generation remains challenged by fuel cost competition as well as the emergence of renewables
Additionally, gas as a transport fuel is expected to grow at an average rate of 2.6%, principally driven by Asia with the growing use of LNG for trucks and river transport. This forecast assumes a tenfold increase in LNG as an international maritime fuel, reaching over 10 bcm by 2025, principally for us in container ships.
Industrial uses account for 40% of gas demand growth to 2025.
As for biomethane, its production is expected to continue to grow at an impressive rate of 12% through the forecast period to reach 10 bcm by 2025. Reflecting the pipeline of biomethane projects, this growth is primarily driven by Europe and North America, which benefit from well-developed and interconnected gas grids.
Leave a Reply