Brussels, 08/06/2016 (Agence Europe) - Massive growth in the production of liquefied natural gas (LNG) will reshape the world gas market over the next five years and maintain a surplus in supplies, despite a reduction in demand and falling prices, explained the International Energy Agency (IEA) in its report on global medium term prospects for gas, published on Wednesday 8 June.
The IEA has revised its forecast for growth downwards for global gas demands, which is now expected to increase by an average of 1.5% a year between 2015 and 2021 (and not 2% as previously anticipated), following annual growth of 2.5% over the past six years, to reach 3 9000 m³ by the end of this period. This rise in demand will be driven by India, China and ASEAN, while demand will weaken in the two biggest LNG purchasing countries, South Korea and Japan.
The IEA explains that the slowdown in demand for all fossil fuels, including gas, can be explained by the reduced growth in demand for primary energy sources and the decline in the global economy is energy intensity. The sustained expansion in renewables, particularly in the US, and the cheap market in coal will also hamper growth in gas in electricity production.
At the same time, gas production is expected to grow by 1.5% a year on average between 2015 and 2021 but this pace will be slower than over the past six years, particularly because of the contraction in investments in this sector.
Gas supplies will be boosted by LNG projects in the US and Australia and the latter will become the main rival to Qatar, which is the biggest exporter in the world. LNG capacity will increase by 45% by 2021.
In total, the gas market is expected to remain in surplus to at least 2018, before gradually rebalancing itself by 2021.
Strong impact of LNG on European market. Significant developments in the global gas market indicate that surplus supplies up to 2021 are expected to keep spot gas prices across the globe under pressure, explained the IEA. The latter said that “unwanted” LNG supplies will look for a home in Europe, due to the flexibility of its gas system and well-developed spot markets. As a result, intense competition will develop among producers to retain or gain access to European customers. “We are at the start of a new chapter in European gas markets” explained IEA Executive Director Dr. Fatih Birol. (Original version in French by Emmanuel Hagry)