Medium-Term Gas Market Report 2013 - IEA

EXECUTIVE SUMMARY
Less surprising in 2012 was the shift of the global gas trade towards hungry Asian markets. 1 These
markets attracted increasingly higher volumes of LNG (+18 billion cubic metres [bcm]), which
diverted LNG from Europe, while increasing amounts of pipeline gas were imported from Central Asia
(+9 bcm). As of 2012, Asia represented 46% of global interregional gas trade, up from 40% the year
before. With this increase, Asia overtook OECD Europe, previously the largest importing region,
which now accounts for 45% of global gas imports. While Europe remained by far the largest pipeline
gas importer, Asia imports almost four times more LNG than Europe. This reflected higher demand
from historical LNG importers such as Japan, Korea and Chinese Taipei, and the import needs of the
region’s largest energy users, China and India. The shift in demand also underlined the emergence of
new LNG importing countries, such as Thailand and Indonesia, which will soon be joined by Malaysia
and Singapore.
World gas demand rises by 15.6%, but grows at a slower rate than coal
Over 2012-18, world gas demand is expected to increase by 15.6% (2.4% per year), to reach
3 962 bcm. This increase of 535 bcm is equivalent to current Middle Eastern gas production, or
1.7 times that of the current global LNG trade. If this incremental consumption were to be met by
LNG supply, this would require an investment of over USD 1 000 billion. Demand growth is lower
than what was forecast in the previous edition, the Medium-Term Gas Market Report 2012 (17.1%).
This also implies that gas demand will grow at a slightly slower rate than coal (2.6% per year), but still
faster than oil (0.7% per year) (IEA, 2012a; IEA, 2013a). While China remains the fastest-growing
country, in absolute volumes, OECD Americas and the Middle East follow with incremental gas
consumption of 84 bcm. Other non-OECD regions continue to see strong demand growth, despite
some local gas shortages, with the exception of the FSU/non-OECD Europe gas market, which grows
modestly at 0.8% per year.
Looking forward, the outlook for natural gas among OECD regions is expected to vary dramatically,
ranging from booming demand in OECD Americas (particularly in the United States) to anaemic
growth in OECD Europe, where consumption rises by a mere 12 bcm to reach 525 bcm by 2018.
European demand would therefore be some 20 bcm below the average pre-global economic crisis
(2005-08) demand level. This represents a significant downward revision from last year’s forecasts
(561 bcm by 2017), due almost entirely to low economic growth and more conservative expectations
in the power generation sector. Since renewable electricity production outpaces total additional
generation needs by 13% over 2012-18, combustible fuels are left with a decreasing residual load,
despite the shutdown of nuclear facilities among certain countries. Over the next two years, an
unfavourable gas, coal and carbon price relationship will contribute to a further drop in European gas
demand to 500 bcm in 2013 (from 513 bcm in 2012). Forward prices indicate a price relationship
improving in favour of gas in the second half of the decade, which will lead to a recovery.
Nevertheless, gas-fired power generation remains at around 100 terawatt hours below its peak of 2008.
OECD Americas presents a much more positive outlook, even though gas prices are assumed to
slightly increase. Growth in demand in the United States is seen in all sectors, with the power
generation sector alone accounting for half of overall growth. Generation from gas-fired power
plants will nevertheless drop in 2013, after an exceptional drop in gas prices was seen in 2012. This
enables coal-fired generation to recover in the short term. Additional gains from gas-fired generation
1 In this context, Asia includes markets as widely different as the mature OECD Asia Oceania LNG importers (Japan and Korea), China and the
other non-OECD Asian countries.
4 MEDIUM-TERM GAS MARKET REPORT 2013
© OECD/IEA, 2013