Patterns in global natural gas trade will see a major shift in the next five years owing to weakening demand in key markets.
Patterns in global natural gas trade will see a major shift in the next five years because of weakening demand in key markets.
The International Energy Agency (IEA) says that new liquefied natural gas (LNG) supplies are coming on line just as demand growth in countries such as Japan and Korea starts to slow.
These trends mean that new LNG supplies will need to find other markets, resulting in major changes to global gas trade patterns. China, India and ASEAN countries will emerge as key buyers, says the IEA.
In its 2016 Medium-Term Gas Market Report, the IEA also says that the combined factors of cheaper coal and strong renewables growth would block natural gas from expanding more rapidly in the power sector.
"We see massive quantities of LNG exports coming on line while, despite lower gas prices, demand continues to soften in traditional markets," said IEA executive director Fatih Birol. "These contradictory trends will both impact trade and keep spot gas prices under pressure."
The IEA report gives a detailed analysis and five-year projections of natural gas demand, supply and trade developments, and sees global demand rising by 1.5 per cent per year by the end of the forecast period, compared with 2 per cent projected in last year’s outlook. Slower primary energy demand growth and the decline in the energy intensity of the world economy are lessening demand growth for all fossil fuels, including gas.
As demand growth for coal and oil also weakens, the share of gas in the energy mix is still expected to increase – albeit modestly – by 2021.
The IEA reports that liquifaction capacity will increase by 45 per cent over the next five years, mostly from new facilities in the USA and Australia. New supplies will seek new markets in Europe because of the region’s flexible gas system and well-developed spot markets.
"We are at the start of a new chapter in European gas markets," Dr Birol said.