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IEA© OECD/IEA 2017
Gas Market Report 2017
Peter Fraser, Head of the Gas Coal and Power Markets Division
Norwegian Ministry of Petroleum and Energy, Oslo, 5th September 2017
© OECD/IEA 2017
Gas in today’s world
The contribution of gas
• Versatile fuel within the energy system, helping to address environmental concerns
• In 2016 gas became the leading power generation source in the US
An abundant fuel, but strong competitive pressures, especially in Asia
• Space for gas squeezed between renewables and coal in some markets
A second natural gas revolution is underway, this time caused by LNG
• A new surge in LNG export capacity is helping unconventional gas go global
• Low prices continue, bringing new LNG-importing countries into the market
Strategic & environmental role of gas deserves attention from policy makers
© OECD/IEA 2017
Demand growth moves from power generation to industrial sector
China, US and India account for half of the growth in industry sector, driven by chemicals and fertilisers
Demand growth by sector
1.5% 1.6%
0
100
200
300
400
2010-16 2016-22
bcm
Energy industry own use
Transport
Residential/commercial
Industry
Power sector
© OECD/IEA 2017
Global demand growth is around 360 bcm in 2016-22
Demand growth focuses in developing countries
Developing countries account for around 90% of the incremental demand
The United States accounts for most of the growth in the developed economies
Developed economies
Developing economies
- 50
50
150
250
350
2016-22 2016-22
bcm
United StatesCanada
Australia
EuropeJapan + Korea
China
India
Middle East
Rest of the world
- 50
50
150
250
350
2016-22 2016-22
bcm
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The United States accounts for 40% of global production growth
The Middle East will continue its production growth
China will become the 4th largest gas producer
Global production growth, 2016-22
- 40 0 40 80 120 160
Europe
Russia
Australia
China
Middle East
United States
bcm
© OECD/IEA 2017
Low production cost supporting continuous growth
The Marcellus, one of the largest fields worldwide, will grow by 45% in 2016-22
Ensuring pipeline access would be vital
0,0
2,0
4,0
6,0
8,0
10,0
12,0
0
50
100
150
200
250
300
2007 2009 2011 2013 2015 2017 2019 2021
USD/MMBtubcm Production volumes and cost of the Marcellus play, 2007-22
Marcellus production Henry Hub Dominion South Wellhead breakeven gas price
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In 2016, US LNG was exported to destinations which have higher margin
Americas
46 %
Asia
30 %
MENA
14 %
Europe
10 %
US LNG merit order among regions, 2016 Share of US LNG destination by region, 2016
US LNG’s destinations driven by premium in 2016
0
1
2
3
4
5
6
Americas MENA Asia Europe
USD/MBtu
Margin
Shipping cost
115% HH
0
1
2
3
4
5
6
Americas MENA Asia Europe
USD/MBtu
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Decreasing European production, increasing import needs
European import requirement grows steadily with flat demand and declining production
It is up to competition between pipeline and LNG to fill this gap
-
10
20
30
40
0
100
200
300
400
500
600
2016 2017 2018 2019 2020 2021 2022
bcm
others
the Netherlands
United Kingdom
Norway
Production
Demand
Import growth
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0
10
20
30
40
50
60
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
bcm
Others
Russia
Qatar
United States
Australia
Second wave of additional LNG supply is already coming online
15 new projects with total export capacity of around 140 bcm are now under construction
Australia and the United States account for 75% of them
Incremental LNG capacity , 2005 - 2022 (bcm)
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Asia, Europe and South America will drive LNG import growth
China and India together will double their LNG imports
Smaller and new LNG import markets will add more than 40 bcm to global LNG imports
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Demand in developing countries reshaping the LNG market
China, India and other developing countries will import more than 50% of all LNG by 2022
LNG import volumes , 2012 - 2022 (bcm)
0
50
100
150
200
250
300
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
bcm
Other developing countries
India
China
Developed countries
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- 50 0 50 100 150 200 250
United States
Australia
Canada
Norway
Qatar
Russia
bcm
2016
- 50 0 50 100 150 200 250
United States
Australia
Canada
Norway
Qatar
Russia
bcm
2022
United States will join the club of top gas exporters
A wave of new LNG supply, led by the US, will provide more options to guard against supply shocks,
changing the gas security equation
Top gas exporters
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Conclusion
Lower prices help gas to strengthen its foothold in Asia
• Developing countries account for 90% of demand growth, China alone for 40%
• Industrial consumers take over from power generation as the main source of growth
The US takes the lead on global supply as the shale revolution gets a second wind
• The US generates almost 40% of the rise in global output & the largest increase in exports
New diversity to global supply & trade, with new entrants on demand & supply side
A glut of LNG continues to put pressure on markets
• Challenges to existing suppliers, business models and pricing mechanisms
Even though markets remain well supplied, recent events remind us that gas security
cannot be taken for granted
