The natural gas forecast has good news in store! The International Energy Agency (IEA) just released its annual natural gas market report, Gas 2018. This report highlights the strong position natural gas will have in the coming years. There are three principal areas that Dr. Fatih Birol, IEA’s Executive Director, noted as significant structural shifts in the upcoming natural gas economy:
- Growing China LNG imports
- Increasing demand for industrial use of natural gas
- Continued increase in US natural gas production
In this article, we will look at these three factors, and what it will take for the US to keep up with the growing natural gas demand.
Growing China LNG Imports
The first of the three major shifts IEA pointed out was the growing China LNG imports. Dr. Birol stated, “China is set to become the world’s largest gas importer within two-to-three years.”
Chinese natural gas demand is forecast to grow by 60% between now and 2023. A significant factor in this growth is China’s new policies aimed at lowering pollution by shifting from coal to natural gas. The IEA Newsroom states, “China alone accounts for 37% of the growth in global demand in the next five years and becomes the largest natural gas importer by 2019, overtaking Japan.”
Although China is the fastest growing LNG importer, they are not alone in their growth. Asia as a whole has the most rapid growth rates for LNG consumption. IEA mentions South and Southeast Asia as growing LNG importers “driven by strong economic growth and efforts to improve air quality.”
By 2023, emerging Asian markets will account for around 50% of all LNG imports globally. This shift in the LNG market will significantly impact trade flows, pricing, and international gas security.
Increasing Demand for Industrial Use of Natural Gas
The IEA report also highlighted that the demand for industrial use of natural gas is rising. Dr. Fatih Birol stated, “industry is replacing power generation as the leading growth sector.”
The industrial sector accounts for over 40% of the growth in global natural gas demand. Power generation only accounts for 26% of the growth. In Asia and other emerging markets, there is a higher natural gas use in industrial processes, as well as feedstock for chemicals and fertilizers.
In the United States, both the industrial and the power sectors have been growing. During the past 10 years, these two sectors have increased from 63% to nearly 70% of total natural gas consumption.
Geology.com sites many uses of natural gas here in the United States, citing natural gas as “an ingredient used to make fertilizer, antifreeze, plastics, pharmaceuticals, and fabrics.” It also notes that natural gas is “used to manufacture a wide range of chemicals such as ammonia, methanol, butane, ethane, propane, and acetic acid.” As a heat source, gas is used “in making glass, steel, cement, bricks, ceramics, tile, paper, food products, and many other commodities,” as well as for incineration.
We can expect this growth in industrial uses of natural gas to continue in Asia, the US, and many industrialized nations.
Continued Increase in US Natural Gas Production
The third of the three major shifts in the natural gas market is the continued increase in the US natural gas production. Dr. Fatih Birol stated, “US production and exports will rise dramatically strongly.”
Thanks to the shale revolution, the US is “leading gas production growth worldwide to 2023.” Last year, 2017, the total US marketed production of natural gas increased 1.4% over 2016. This year, the total natural gas marketed production is set to see a remarkable 10.5% growth over 2017. While this tremendous growth is not a sustainable number long term, we are still forecasted to see 3.5% growth in gas production during 2019.
What Is Required for Continued Growth of US LNG Exports
The natural gas forecast is not without obstacles. To see continued growth of US LNG exports, some challenges must be overcome. Says the IEA, “While gas has a bright future, the industry faces tough challenges. These include the need for gas prices to remain affordable relative to other fuels in emerging markets and for the industry to curb methane leaks along the value chain.”
Contracts for LNG exports must be in place for investors to put forth the funds to build new LNG terminals. According to Bloomberg, it takes about four years to construct an LNG gas terminal in the USA. Poland has just announced two new contracts, though these contracts are small. To be able to build out the LNG terminal and natural gas pipeline infrastructure required to meet the demands after 2023, more contracts will need to be put into place during the next few years.
Methane leaks is another area that IEA touched on as a challenge for natural gas growth. While natural gas is much cleaner than coal and oil, methane leaking into the atmosphere is a concern for our continued movement toward cleaner, greener fuels. For a more in-depth analysis of methane leaks and what can be done, read here.
Milestone Companies promotes cleaner fuels and technologies. As a natural gas pipeline contractor and gas facilities construction company, we are proud to share in building the infrastructure that is moving us to cleaner and more affordable fuels.