Report reviewStrategy implications of world gas market dynamics
Section snippets
BP energy outlook
Projections of future energy use based on long-term energy trends for the period 2010–2030 have been released by BP for external use, for the first time, in its Energy Outlook 2011 [1]. The starting point of the BP Energy Outlook has been BP’s own Statistical Review of World Energy 2011 [2], which is published every year in June. BP CEO Bob Dudley states it is the company’s responsibility to make important information and energy analysis available for public debate, because energy and its
Gas trade
Fig. 1 outlines the world’s major traded gas flows between continents and regions for 2010 [2]. The global trade of natural gas increased 10.1% in 2010. World gas trade is still dominated by nearly 60% pipeline gas importation. Pipeline exports grew by just 5.4%, led by growth in Russian exports. Europe and Eurasia together still account for roughly two-thirds of the global trade volume of pipeline gas imports. However, LNG supplies have risen much faster than pipeline imports. LNG shipments
Gas consumption
World natural gas consumption grew by 7.4% in 2010 (Fig. 2a), with above-average growth in all regions but the Middle East. Consumption growth was above average in all regions – the most rapid increase since 1984 – except the Middle East. The US had the world’s largest 2010 increase in consumption (in volumetric terms), rising by 5.6% to a new record high [2]. Russia and China also registered large increases – the largest volumetric increases in the country’s history in each case. Consumption
Gas production
The world’s production of natural gas increased by 7.3% in 2010 (Fig. 2b), recording the largest increase since 1984 [2]. Natural gas production continues to grow in every world region, except Europe - where decline rates at mature fields are reversing the production gains seen in previous decennia [3]. Production growth was above average in all regions; Russia recorded the largest production gains in absolute increment. Domestic production grew rapidly in Qatar (+30.7%), Russia (+11.6%), and
Conventional gas reserves
World conventional gas reserves (including tight gas) have expanded between 1990 and 2010 by 50% (Fig. 3a). This expansion occurred unevenly across the regions distinguished in Fig. 3a, lead mostly by growth of gas reserves in Middle East. The Middle East and the Former Soviet Union jointly hold 72% of the world’s remaining conventional gas reserves.
Fig. 3b shows that proved gas reserves in 2010 were sufficient to meet another 58.6 years of global production, as follows from the world average
Gas consumption to 2030
In BP’s Energy Outlook [1] natural gas consumption is projected to account for the fastest growing fossil fuel globally to 2030, but growth slows relative to its historic growth (Fig. 4a). Over the past two decades, the compounded growth of natural gas demand by 2.4% annually is twice as fast as oil demand growth. The absolute volume of global gas demand amounts to 300 Bcf/d in 2010 and is set to grow by 8.4 Bcf/d per year. On an energy equivalent basis, global gas consumption equals to about
Gas production and reserves to 2030
The world had 6621 Tcf of proved gas reserves in 2009, sufficient for 63 years of production at current levels [1], but in 2010 this had already dropped to 58.6 years [2]. Although gas production grows in every region except Europe, the increasing demand continues to outpace any growth in global reserves. With declining conventional fields, Europe’s gas import requirement is likely to double by 2030. Unconventionals remain to be appraised in detail globally, and could add another 30 years of
LNG trade to 2030
LNG supply is projected to grow 4.4% p.a. to 2030 [1], more than twice as fast as total global gas production (2.1% p.a.). Its share in global gas supply increases from 9% in 2010 to 15% in 2030. Demand is driven by Europe (5.2% p.a., 36% of the global increment) and non-OECD Asia (8.2% p.a., also 36% of the increment). In Europe, the share of LNG in total imports expands from 30% in 2010 to 42% in 2030 (Fig. 6). In non-OECD Asia, 74% of the gas demand growth for LNG is from China and India.
The
Historic gas prices
Natural gas prices are subject to regional market dynamics and may differ considerably in the world’s major gas markets (Fig. 7). The oil-indexing of the Continental European gas prices ensures that these rise in step with the recovery of the global oil prices [8]. The European and US gas markets in effect have become decoupled, which may result in a large price differential between these two major gas markets [9]. Since the onset of the Great Recession in 2008, natural gas prices in the
Future gas prices
The short term US gas price forecast (with seasonal swings in step with the demand cycle) is given in Fig. 8a. The baseline is set by the NYMEX gas future contracts, and the higher scenarios are by Deutsche Bank economists, projecting a median US gas price of $6/Mcf by 2015. Much more volatile price scenarios may unfold when production capacity is shut in if cash flow problems would lead to the demise of major shale gas players [10]. Fig. 8b shows the mid and long term US gas price scenarios by
Strategy conclusions
Demand for gas continues to grow in all major gas markets. However, demand growth leads to a further decline of the reserve replacement ratio, unless technology innovations help to unlock the new unconventional gas reserves. Even assuming such unconventional gas will come on stream worldwide, Europe and Asia will compete for access to LNG and pipeline gas imports to fill an imminent gas supply gap. The consequent rise of natural gas prices in all world markets will help to make stranded gas in
References (12)
- BP Statistical Review of World Energy, June 2011....
- BP Energy Outlook 2030, January 2011....
Time for Europe to face oil and gas supply realities
First Break
(2011)Annual Energy Review 2009. Projections: National Energy Modeling System, run REF2011.D120810C
(2009)Total reserves data RNGR11NUS_1a
(2011)CBM reserves data RNGR51NUS_1
(2011)
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