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Is US LNG Changing the International Gas Market?

The global natural gas market could soon see a massive transformation as it prepares to meet growing demand in developing economies.

According to the IEA (Gas 2017), natural gas now plays a major role in the global energy mix, with far-reaching consequences on energy trade, air quality and carbon emissions, as well as the security of global energy supplies.

Globally, demand for gas is expected to grow by 1.6% a year over the next five years, with consumption estimated to reach 4000 billion cubic meters by 2022, up from 3630bcm in 2016.

40% of this growth comes from China, where demand from the industrial sector will become the main catalyst for gas consumption growth, replacing power generation. However, it's the United States - the world's largest gas consumer and producer - that will account for 40% of the world's extra gas production due to the 'remarkable growth' in the domestic shale industry.

By 2022, it's estimated that US production will have grown to a 5th of the global production, and production from Marcellus, one of the world's largest fields, will increase by 4.5% between 2016 and 2022 as producers increase efficiency and produce more gas. More than half of the production increase will be used for liquefied natural gas (LNG).

Fatih Birol, Executive Director at IEA, said, "The US shale revolution shows no sign of running out of steam and its effects are now amplified by a second revolution of rising LNG supplies. Also, the rising number of LNG consuming countries, from 15 in 2005 to 39 this year, shows that LNG attracts many new customers, especially in the emerging world. However, whether these countries remain long-term consumers or opportunistic buyers will depend on price competition."

US LNG is set to change the international gas market dramatically by diversifying supply, challenging traditional business models and suppliers, and transforming gloabl gas security, the report said.

This ample supply of LNG means that there is new competition with pipeline gas supplies which in the long-term could benefit consumers. The competition is set to lower prices that have traditionally characterized long-distance gas trade.

Outside of the US, Europe could also see growing competition between LNG imports and pipeline gas as domestic production declines, creating uncertainty on the sources of future supply, "Even in a well-supplied market, recent events remind us that gas security remains a critical issue," said Birol.

Source: LNG World News