Medium-Term Gas Market Report 2013 - IEA

EXECUTIVE SUMMARY
will therefore be driven by increasing power demand. The residential/commercial sector, however,
shows an underlying declining trend that is only compensated for by the fact that 2012 was
exceptionally mild. In Asia Oceania, the major uncertainty is the future of nuclear energy in Japan.
Assuming that a partial return of nuclear power plants leads to a decrease of expensive and
inefficient oil-fired generation, gas-fired generation will show only modest gains in the medium term.
Australia’s gas consumption rises sharply following the introduction of a carbon price and LNG
liquefaction plants from 2015, while Israel benefits from the development of its domestic gas fields.
Gas use in road transport to take off
The road transport sector is foreseen to be a new factor of demand growth as gas expands as a
transport fuel. In the past, consumption of gas in the transport sector was seen among non-OECD
regions – in Asia and Latin America, as well as China, Iran and Egypt – motivated by oil import
dependency, utilisation of domestic gas and urban air quality. However, the shale gas revolution has
triggered strong investor interest in natural gas as a transport fuel in the United States. Gas use in
road transport represented 1.4% of global gas demand in 2012, but this share should rise to 2.5% by
2018 as consumption grows to around 50 bcm in the same period (9.4% of additional gas demand).
This covers around 10% of the incremental energy needs of the transport sector, more than electric
cars. China is dwarfing developments in other regions as its consumption triples to 39 bcm, due to
the combination of the need to develop cleaner transport vehicles, attractive gas prices versus oil
and the wish to reduce oil dependency through alternative vehicles technologies. Strong demand
growth is also seen in other Asian countries as well. In the United States, the expanding use of gas in
transport is supported by the divergence between gas and oil prices, as well as policy incentives.
Especially promising in the United States is the conversion of long-haul heavy trucks from diesel fuel
to LNG. In contrast, despite limited growth in Europe, the industry is looking to develop new markets
to compensate for the bleak picture in other sectors.
In each region, each part of the gas value chain needs to be developed simultaneously in order to
solve the chicken-and-egg problem of having a sufficient number of filling stations and natural gas
vehicles (NGVs). This implies developing sufficient gas supply and building liquefaction plants to feed
LNG heavy-duty vehicles, as well as LNG or/and compressed natural gas refilling stations. The
economics should be attractive for all parts of the gas value chain, in particular owners of fleets of
cars or trucks. Use of LNG as a trucking fuel seems to answer many concerns, in particular the
chicken-and-egg issue, as fleet owners can team up with LNG retailers and a positive return on
investments can be reached within a few years. The car industry should be able to deliver a sufficient
number of vehicles by introducing NGVs in their product range, and by working on decreasing the
price premium over alternative gasoline or diesel vehicles, provided that economics and policy
incentives generate demand for such vehicles. Necessary conditions include: the harmonisation of
standards and rules; proper training of personnel involved in trucking; handling NGVs and filling
stations; and retrofitting vehicles into NGVs.
Other uses of gas in the transport sector are also under investigation, but are significantly less
advanced than road transport. Gas use by bunkers remains a longer-term issue, more likely to take
off if and when new emissions regulations kick in globally. There is also mounting interest in gas use
in the rail sector, notably in regions such as North America and Asia, where locomotives use diesel.
© OECD/IEA, 2013
MEDIUM-TERM GAS MARKET REPORT 2013 5