By 2017, China will become the third largest natural gas importer behind Europe and the Asia-Pacific region, according to the International Energy Agency (IEA).

KUALA LUMPUR, Malaysia -- In its “Medium-Term Gas Market Report 2012,” the IEA projects that China will more than double its natural gas consumption over the next five years, North America will become a new LNG exporter, and the U.S. will continue to benefit from the unconventional gas revolution.

IEA Executive Director Maria van der Hoeven unveiled the report during the World Gas Conference 2012 on June 5 in Kuala Lumpur.

“The ‘Golden Age of Gas’ has dawned in North America, but continued expansion worldwide depends on producing gas and bringing it to the market in a way that is friendly to investors and society as a whole,” she said.

“Unconventional gas production is expected to continue to expand over the medium-term, led by developments in North America.

“Beyond this region, production growth will mostly come from tight gas and coal-bed methane, and from Asia-Oceania, in particular Australia, China, India and Indonesia.”

According to the IEA report, shale gas developments in the medium-term will be limited with the most likely developments taking place in China and Poland.

Boosting Global Gas Supply

The medium-term report covers expectations in the next five years. Even though the report acknowledged East Africa as the new “Golden Coast,” the development of those reserves are expected around 2018-19 and thus aren’t included in this forecast.

“Global gas supply increased by 3% in 2011, reaching 3,375 billion cubic meters (Bcm) [119.1 trillion cubic feet {Tcf}]. The 93-Bcm (3.3 Tcf) increase was almost entirely from three countries – the U.S., Russia and Qatar,” according to the report’s executive summary. Global gas supply also increased faster than demand.

The increase was in the face of unrest as a result of the “Arab Spring” in North Africa and the Middle East.
Global gas production is projected to increase by 562 Bcm (19.8 Tcf) over 2011-17. Gas output will rise in all regions, except Europe.

European production in 2011 plummeted by 28 bcm (988 Tcf) in one year. The U.K., Netherlands, Denmark and Germany all contributed to declining gas production.

OECD regions are expected to provide 30% of the growth in global production capacity over the projection period, changing the trend of the previous decade, the report noted.

Shale gas, tight gas and associated gas from tight-oil plays gained in importance. “Unconventional gas represented 16% of global gas production as of 2011. Despite the growing interest in shale gas, half of unconventional gas production consisted actually of tight gas,” the IEA said.

“Production increases in 2011 came mostly from North America, where shale gas continues to boom despite record low gas prices and the reduction in the number of rigs,” the report continued.

Low Gas Prices Impact Some Regions

“Many Asian, Middle Eastern, African and Latin American countries share the potential risk that, given low domestic gas prices and, in some cases, more difficult fields to develop, domestic gas supply does not increase sufficiently to meet potential gas demand.

“This leaves these countries with two options -- besides fixing the gas policies -- and those are to either curb gas demand or import (often more expensive) gas,” the IEA explained.

“On the production side, the former Soviet Union/non-OECD Europe and OECD Americas regions will be the most important providers of additional gas supplies, since these represent 43% of the additional production reaching markets during 2011-17,” the agency continued.

Given its development of associated gas in shale-oil plays, the U.S. is expected to be slightly ahead of Russia in terms of natural gas production in 2017.

LNG Is Key To International Gas Trade

“Global LNG trade will slow down considerably over the coming three years before abruptly accelerating again in 2015 as both the new wave of Australian LNG and exports from the U.S. are projected to come online,” according to the report.

IEA expects LNG exports to begin from the Sabine Pass Liquefaction project, which received authorization from the Federal Energy Regulatory Commission in April 2012.

“Most of these new projects will not be cheap with construction costs anticipated to be twice as high as those for plants that came online over 2009-11. And most, according to the IEA, will sell at oil-indexed prices.

The report is available at the IEA’s online bookshop. 

Contact the author, Scott Weeden, at sweeden@hartenergy.com.