Global gas and LNG market tightening after 2022, new LNG investment needed – IEA

LNG facility

Gas and LNG demand driven by growth in the East

In the latest update of IEA’s outlook, they dive deep into the discontinuities that could swing the gas markets one way or another, according to the International Energy Agency.

In China, the extent to which government targets on gas consumption are met could mean a 100 bcma (billion cubic metres per annum) variance in global gas demand by 2030. Renewable energy sources like wind and solar also have the potential to be a significant disruptor.

Five trends in the global natural gas and LNG industry:

1. Demand driven by growth in the East

China, India, and South East Asia are expected to see the strongest demand growth on the back of continued strong economic growth, increased concerns about air quality, and growth in the industrial sector.

2. Supply growth from major resource holding regions

The large resource base in the US, the Middle East, and China will together account for ~70 per cent of incremental supply of ~800 bcma, increasing market share, and taking a larger share of international trade.

3. Gas still primarily consumed where it is produced

However the market will become increasingly interconnected through both cross-border pipelines and increasing LNG volumes, mostly in emerging markets. The volumes of LNG traded will increase from 350bcm to ~676bcm between 2016 and 2030.

4. LNG prices will have a major impact on the global gas industry

The pricing dynamics will be different in the short term until the early 2020s when the market is still oversupplied and change as the market becomes tight after 2022.

5. Post 2022, the world will require new FIDs on liquefaction projects

The relatively advantaged economics of brownfield and expansion projects and the decoupling of upstream and liquefaction in the US are resetting capex and project financing expectations – departing from the old paradigm of integrated mega-projects.