IEA: China seen doubling gas demand by 2017

China will more than double its gas consumption over the next 5 years, while lower prices from the unconventional gas revolution will continue to benefit the US, according to a new report from the International Energy Agency.

IEA’s Medium-Term Gas Market Report 2012, released June 5 at the World Gas Conference 2012 (WGC 2012) in Kuala Lumpur, says China will become the third-largest importer of gas behind Europe and Asia Oceania, driving a 2.7%/year average growth in global gas demand through 2017. This is up from the 2.4%/year growth rate predicted in last year's report.

Also during the period, North America will become a net exporter of LNG, although low gas prices will result in gas generating almost as much electricity as coal in the US by 2017, according to IEA.

Japanese imports will increase, although by how much will hinge on the country's nuclear policies, IEA said.

The so-called “Golden Age of Gas” has dawned in North America, but its continued expansion worldwide depends on producing gas and bringing it to market in a way that is friendly to investors and society as a whole, IEA Executive Director Maria van der Hoeven said at the report’s launch.

“As gas competes against other energy sources in all market segments, notably in the power sector, pricing conditions are a key element to keep it competitive everywhere. This medium-term report aims to facilitate investor decisions by providing a timely, in-depth analysis of the current trends and what we expect to take place over the coming 5 years,” Van der Hoeven said.

The report said natural gas is the most important commodity without a global market price. Divergence among regional gas prices will decline but remain a feature of global gas markets over the forecast period, and the emergence of a spot price in Asia would aid regional producers and buyers, according to the report.

While the outlook calls for a rise in gas demand in most regions, demand in Europe will be limited by low economic growth, relatively high gas prices, and strong growth of renewable energy. The report noted that successful and timely developments of new resources should lift gas demand in the Middle East, Africa, and Asia.

The report identifies other future sources of supply, with most incremental production coming from the former Soviet Union and North America. Further growth in unconventional gas will come mostly from shale gas in North America in addition to tight gas and coalbed methane production elsewhere. Shale gas developments in other regions are likely to be concentrated in China and Poland.

The report noted that global gas trade will expand by 35% over the forecast period, driven by LNG and pipeline gas exports from the FSU region. Most of this expansion occurs from 2015 onwards, following a time of further tightening of global gas markets.

ExxonMobil gas outlook

Meanwhile, ExxonMobil Corp. forecasts that by 2025, gas will overtake coal to become the second most widely used source of energy worldwide.

“The need for natural gas resources is greatest in regions like the Asia-Pacific, where energy demand is projected to grow by more than 50% over the next 3 decades,” Rex W. Tillerson, ExxonMobil chairman and chief executive officer said June 5 at WGC 2012.

North America has been the proving ground for unconventional gas development, and the results have been encouraging, confirming the enormous potential of this resource. “The challenge now is to confirm the size of the global unconventional resource and to fully apply these breakthrough technologies to nations outside North America,” Tillerson said.

“Our future success will depend not only on geologic conditions and technological innovations, but also on government policies, effective business partnerships, and disciplined investments,” Tillerson said, adding, “Fortunately, as government and industry leaders consider the growing importance of natural gas and the need for its development, they can study and learn from the successes and shortcomings of the North American experience.”

Tillerson noted that these policies needed to responsibly develop gas should hold the industry accountable to operational integrity and excellence without stifling innovation and investment.