I was asked, in a television interview a few years ago, whether natural gas demand will ever overtake that for crude oil. My answer was in the affirmative, though I said that the time frame maybe more difficult to define, which is still the case.
However, given current forecasts and the fact that annual growth in gas demand is almost double that of oil, it is possible that the important event may happen around 2050. It may even come earlier if environmental policies are further intensified.
According to a survey by Hydrocarbon Processing Magazine, the growth in new gas processing project announcements within the past year indicates a 76 per cent increase. The number of active projects around the world in the last three years averaged 839, while annual projects announcements in the last three years averaged 114 as the growth of both supply and demand drives industry expansion. There should be no wonder as gas is the fuel of choice now, especially in the largest consuming sector of power generation.
The expansion is across all activities of the industry, from exploration and production to processing, liquefaction, re-gasification and transmission and distribution pipelines. While world gas consumption in 2012 was close to 117 trillion cubic feet (tcf), the US Energy Information Administration (EIA) forecasts consumption to increase to 185 tcf by 2040. The International Energy Agency (IEA) is forecasting consumption to be close to 174 tcf by 2035.
While all regions are expected to witness growth, the strongest is expected in non-OECD countries as they capture “more than 70 per cent” of the world growth to 2040, according to EIA.
Shale gas output
Due to the significant increase in US shale gas production, the expansion there is undoubted, where 98 projects have been announced in the 2011–13 period at all venues of the industry. This includes the possibility of the country becoming “one of the world’s leading exporters of liquefied natural gas (LNG) by the end of the decade”. The US is expected to construct over 200 million tons a year (mt/y) of LNG capacity in coming years, all destined for export and equivalent to two-and-a-half-times the capacity in Qatar, the current leading exporter.
The same prompted Canada to plan a 50 mt/y LNG export capacity sited on the both the Pacific and Atlantic sides as its exports to the US declines.
The survey says that “the Asia-Pacific region is expected to surpass Europe as the world’s second biggest natural gas market as early as 2015”. Therefore many facilities are planned or under construction in Asia, especially in China and India for receiving LNG and in Australia and Indonesia for expanding production and liquefaction.
Even Singapore and Malaysia are constructing bidirectional terminals for import and export of LNG.
Russia is investing in the east and west of the country to reach some 40 mt/y by 2020. Not much is going on in Western Europe except a couple of LNG receiving terminals and declining production.
But more activity is expected if Europe is to diversify its supplies away from Russia.
In Africa, production is expected to double by 2040 to over 14 tcf a year especially with the discoveries and development in Mozambique and Tanzania where LNG projects are also planned.
In Latin America, production and demand are rising and Brazil is planning many LNG facilities, floating and onshore, to supply other Latin American countries.
Where does this leave the Middle East with 40 per cent of world’s reserves? Demand of 14 tcf in 2011 is expected to increase to 24.5 tcf by 2035 as the need for electric power and other industries rises sharply.
The expansion in Qatar with the Barzan gas project to supply local needs with a capacity of 0.73 tcf a year is the most notable expansion. The promised expansion in Iraq is slow in coming, so much so the country is about to import gas from Iran. Saudi Arabia, however, is resorting to heavy residue gasification to fuel its power station in Jizan for the lack of natural gas.
There is no doubt that the Arab countries of the East are short of gas for their future development and a lot of expensive liquid fuel is used in power generation instead. The region needs to give importance to local consumption vis-à-vis exports to build LNG facilities. If the countries are rightly aspiring to connect their electricity grids, then they should follow with pipelines to give countries short of gas their requirements.
It is strange that some are buying LNG on the open market while they cannot sort out the political problems of getting pipeline gas from neighbouring countries.
— The writer is former head of the Energy Studies Department, Opec Secretariat in Vienna.
