Neil Thomas, Head of Gas Research for Wood Mackenzie presenting at the World Gas Conference in Buenos Aires, said that the fundamentals of the gas industry have shifted due to significant changes in the macro environment. The implications of this include: reduced demand outlook and oversupply, leading to a strategic change for suppliers and a tougher long term pricing outlook.
Thomas, citing analysis from Wood Mackenzie's Global Gas Service which was launched at the conference, told delegates: "Our global gas demand outlook is 200bcm per annum less in 2015 than it was eighteen months ago, pre-economic crisis. The new reality for the global gas industry is reduced demand and oversupply, the effects of which will be felt in the medium and long term."
But Thomas told the conference that Wood Mackenzie's long term forecast for global gas demand from 2008 to 2020 is a 2.4% Compound Annual Growth Rate (CAGR) with Asia Pacific remaining the strongest demand growth region at 4.5% CAGR.
"The reduced demand outlook is being realized at the same time as significant additional supply is coming to the market including considerable unconventional gas from onshore NA producers - something not anticipated just a few years ago," Thomas added.
As a result of faltering demand, Wood Mackenzie says major suppliers, Russia and Qatar in particular, will need to adjust their export strategies to the new external environment: "For Russia the challenge is developing their massive potential gas supply and diversifying markets away from Europe – requiring capital intensive infrastructure development such as further liquefaction facilities and new pipelines to China, possibly competing for capital with some current Europe pipeline plans," Thomas explained.
"With Atlantic spot gas prices depressed, Qatar may seek to re-route much of its LNG earmarked for the Atlantic to the Pacific instead. This additional supply competition in the Pacific could be bad news for some new Australian LNG projects seeking market and could further deteriorate Pacific LNG pricing levels."
Thomas said that China is in the best position to take advantage of the changing dynamics with renewed import options from Central Asia and Russia putting pressure on some estimates of China LNG import requirements.
The presentation stressed that the gas markets around the world are no longer operating in isolation and interconnectivity is a feature of the new, truly global gas industry.
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