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Natural gas in the world energy mixPeter Fraser, Head of Gas, Coal and Power Markets
Presentation to IGU Executive Committee Workshop, Muscat, Oman 30 March 2017
2
Natural gas sharein the global energy mix
World total primary energy demand in 2014
In 2014, the fossil fuel share accounts for 81% of the world’s TPED
Coal 29%
Oil31%
Gas21%
Nuclear5%
Hydro3%
Bioenergy10%
Other renewables
1%
3
Change in global primary energy demand
Low-carbon fuels & technologies, mostly renewables, supply nearly half of the increase in energy demand to 2040
Low-carbon
Oil GasCoal
500
1 000
1 500
2 0001990-2015 2015-2040
Mto
e
Low-carbon
Oil GasCoal
Nuclear
Nuclear
Ren
ewab
les
Ren
ewab
les
Rest of world
EuropeanUnionLatin
America
India
US
Africa
China
SE Asia
A new fuel in “pole” position
4
A wave of LNG spurs a second natural gas revolution
Share of LNG in global long-distance gas trade
Contractual terms and pricing arrangements are all being tested as new LNG from Australia, the US & others collides into an already well-supplied market
2014685 bcm
20401 150 bcm
2000525 bcm
LNG53%
PipelinePipelineLNG42%
Pipeline
LNG26%
5 © IEA 2016
In the medium term:Growth in global gas demand slows
Growth in gas demand slows as it faces greater competition in the power sector; yet it is the only fossil fuel that does not suffer a decline in its share of the energy mix
0
100
200
300
400
500
600
2009-15 2015-21
bcm
Change in world natural gas demand
Change in total gas demand
2.5 % 1.5 %
Change in per cent
6 © IEA 2016
China drives increase in global gas demand, as the United States takes a back seat
US gas demand growth slows sharply, driven by stagnation in the power sector;EU gas demand gradually recovers on coal & nuclear power plant retirements
-100
-50
0
50
100
150
China Middle East United States India EU Korea and Japan
bcm
Change in natural gas demand by region (bcm)
2009-15 2015-21
7 © IEA 2016
Growth in gas production is led by the United States and Australia
The United States & Australia rather than the more establishedexporters – Russia, Qatar & ASEAN – are the main source of production growth
-100
-50
0
50
100
150
200
United States Australia Qatar China Russia ASEAN EU
bcm
Change in natural gas production by region (bcm)
2009-15 2015-21
8 © IEA 2016
Global LNG export capacity increases sharply
LNG capacity additions will be led by the US & Australia over the next five years; projects in Canada & East Africa could also move ahead if demand & prices recover
0
40
80
120
160
200
2009-15 2015-21
bcm
Liquefaction capacity additions
Australia Qatar U.S. Others
9 © IEA 2016
As imports from Japan & Korea are set to decline, the rebalancing of global markets will depend on the rate of expansion in China & other developing Asia
Developing Asia emerges as key engine of LNG import growth
-40
0
40
80
120
160
2009-15 2015-21
bcm
Change in LNG imports by region
India China Other developing Asia EU Korea + Japan
10 © IEA 2016
86%
88%
90%
92%
94%
96%
98%
11 12 13 14 15 16 17 18 19 20 21
Utilization rate
Liquefaction plants to run below capacity amid supply glut
Note: nameplate capacity has been adjusted to reflect outages, and feed-gas issues
Oversupply in the market will get worse before it gets better. This will put pressure for increased flexibility in contracts and a reduced linkage to oil.
11 © IEA 2016
Share of fixed destination(%)
Contract length(year)
Signed up to 2014 Signed in 2015
Contract length(years)
LNG contract structures are becoming less rigid – increasing market efficiency
16
11
60 %
40 %
17
Fixed Flexible
Share of fixed destination(%)
Contracts with flexible destinations & shorter terms are becoming more common;buyers will accept longer contracts in exchange for increased destination flexibility
12 © IEA 2016
Aggressive emissions reduction impacts other fossil fuels more than gas
(2014 – 13684 Mtoe)
World total primary energy demand
450 scenario (2040 – 14878 Mtoe)
World total primary energy demand
Coal 29%
Oil 31%
Gas21%
Nuclear5%
Hydro3% Bioenergy
10%
Other renewables
1%
Coal 13%
Oil 22%
Gas22%
Nuclear11%
Hydro4%
Bioenergy16%
Other renewables
12%
In the 450 scenario, natural gas share grows slightly, although fossil fuels’share decreases to 57% of the world’s TPED
13 © IEA 2016
• The World Energy Outlook (WEO) “New Policies” case to 2040 shows natural gas as the fossil fuel with the biggest growth.
• This growth is made possible by increased production and use of LNG.
• In the medium term, LNG production is increasing despite an already well supplied market leading to excess capacity and more flexible contracting for LNG.
• More aggressive emissions reduction “WEO 450” will slow global gas demand growth, but it still grows.
Key messages