Global gas production exceeded demand in 2020

Last year hurt demand for all fuels, and natural gas was no exception. According to the latest analysis from Rystad Energy, global natural gas production dropped by 3.6% in 2020 as low oil and gas prices led to lower exploration and production. The market analyst estimates the total produced figure at around 3,918bn cm for the year.

North America was the gas-producing region that the pandemic impacted the most, with production estimated to have dropped by 47bn cm from 2019 to 1,103bn cm in 2020.

Despite the lockdowns, gas demand was shielded by low prices which made gas competitive in the power sector, preventing a larger drop. Demand for gas therefore did not fall as much as for oil, recording only a 2.5% decline to an estimated 3,840bn cm.

While demand in Asia remained relatively strong, European consumption was more severely affected, dropping around 7% year-on-year, by around 40bn cm, followed by Africa with 26bn cm.

Liquefaction capacity grew 5% in 2020, reaching 464mn t/y, as new plants started operations, mainly in the US. US capacity is estimated to have reached 71mn t/y (+42%) with the commissioning of trains at Cameron, Corpus Christi, Elba Island and Freeport. Russian capacity reached 29mn t/y.

Despite lockdowns, global LNG imports grew 3% to 363mn tonnes in 2020. Asian LNG demand grew 4% year-on-year, mainly driven by China. Other buyers in the region also took advantage of low prices to substitute coal in power. European imports remained strong during the first half of the year as buyers nominated less Russian piped gas.

Looking towards 2040, Rystad Energy predicts global natural gas production will grow by 24% to 4,857bn cm in 2040, with most additions coming from North America (+410bn cm versus 2020 production), followed by Russia (+190bn cm) and the Middle East (+185bn cm).

US natural gas production could reach 1,194bn cm in 2040, driven by output from the Marcellus and Permian basins, notes the market analyst. Shale production is at risk, however, due to the new government. Russia, Iran and Qatar can contribute with substantial output. Europe will be the only region to decline (–74bn cm) due to lower production from Norway and the Netherlands.

Global natural gas demand is set to increase through 2040 by 26% to 4,867bn cm, with Asian demand being by far the largest addition (+537bn cm versus 2020), as gas is needed to power the region despite growth in renewables.

Meanwhile, environmental policies in Europe and growth in renewables are forecast to lead to a decline in demand from 2024, with the total demand losses on the continent to reach 43bn cm in 2040, compared to 2020 demand. US demand is also at risk due to new environmental policies expected to be announced by the Biden administration.

Global liquefaction capacity is expected to nearly double by 2040, reaching a total of 886mn t/y, a 91% increase from 2020. With gas production growing the most in the US, its liquefaction capacity can continue to increase to 220mn t/y in 2040, suggests Rystad Energy. The US is expected to be followed by Qatar with 124mn t/y, Australia with 96mn t/y and Russia with 70mn t/y.

Global LNG production is expected to reach 672mn tonnes in 2040, a 79% growth from 2020 numbers. A spectacular rise in LNG production in the US is expected (+203mn tonnes for the whole of North America) as gas production grows but domestic demand growth is limited, suggests the market analyst. Qatar will continue to be a key LNG player driving Middle Eastern exports, while Mozambique will help put Africa back on the LNG map. However, more LNG production is needed to keep up with demand.

Far exceeding production, the need for LNG imports is expected to grow to 736mn tonnes in 2040. Due to limited domestic production, Asia will absorb most of the growing LNG supplies to fuel the increasing power demand. China, India, Pakistan, Thailand and Bangladesh will also drive the growth. European imports will drop as pipeline imports are accessible.

Figure 1: Overview of 2020’s gas market and outlook towards 2040
Natural gas capacity in bn cm; LNG capacity in MT
Source: Rystad Energy