Surging demand to drive global gas boom until 2023

The natural gas market is set to undergo ‘deep transformations’ in the next five years, with strong demand growth from China met with and rising supplies from the US, according to the International Energy Agency (IEA’s) latest market forecast.

Global gas demand will grow at an average rate of 1.6% per year over the next five years, reaching just over 4,100bn cubic metres (bcn) in 2023 – up from 3,740 bcm in 2017, according to findings in the IEA’s Gas 2018 report.

Speaking of the report, Dr Faith Birol, the IEA’s Executive Director, said: ‘China is set to become the world’s largest gas importer within two to three years, US production and exports will rise dramatically, strongly, and industry is replacing power generation as the leading growth sector.’

China’s gas demand is forecast to grow by 60% between 2017–2023, underpinned by the nation’s policies that are aimed at reducing local air pollution by switching from coal to gas. China alone accounts for 37% of the predicted growth in global demand in the next five years and is set to become the largest natural gas importer by 2019, overtaking Japan.

Strong growth in gas use is also predicted for other parts of Asia, including South and Southeast Asia, driven by strong economic growth and efforts to improve air quality.

For end-use sectors, industry will become the largest contributor to the increase in global gas demand to 2023, overtaking power generation, which has historically held this role. This will be dominated by Asia and other emerging markets, thanks to higher gas use in industrial processes and as feedstock for chemicals and fertilisers. Overall, industry will account for over 40% of growth in global gas demand to 2023, according to the IEA followed by the 26% of growth from power generation.

The supply side will also undergo major changes, the report highlights, with the US expected to lead on gas production growth worldwide to 2023, thanks to the ongoing shale gas revolution. Most new US supplies will be geared at export markets as LNG or through pipelines, the report highlights.

In terms of global gas trade, LNG will progressively take on a larger share of the market, especially in Asia. LNG trade as a share of total gas trade is forecast to rise from a third in 2017 to almost 40% in 2023. By 2023, it is expected that emerging Asian markets will account for around half of global gas imports. The continued rise in the LNG market will have significant impacts on trade flows, pricing structures and global gas security, says the report.

The current wave of LNG export projects is also expected to increase liquefaction capacity by 30% by 2023, led by an increase in output from the US, which is forecast to account for nearly three-quarters of the growth in total global gas exports in the period, followed closely by Australia and Russia. 

However, a lack of new LNG projects after 2020, which could lead to a tightening of LNG markets. Due to the typically long-lead time of such projects, investment decisions will need to be taken in the next few years to ensure adequate LNG supply beyond 2023, the IEA adds.

A further critical factor for gas prospects – especially in emerging markets – will be improving air pollution and reducing environmental footprints – including by reducing methane emissions and expanding the deployment of carbon capture, utilisation and storage technology.