![]() ![]() However slower growth in gas demand post-2020 results in liquefaction capacity additions outpacing incremental LNG import through 2025, thus limiting the risk of a tight LNG market over the forecast period. #FRACKED GAS PRICE TRENDS DRIVER#Trade – LNG remains the main driver of international gas trade, as the 2018-19 wave of investment in liquefaction projects delivers additional export capacity in North America, Africa and Russia. ![]() Gas production in Russia, the other large contributor to incremental supply, is almost entirely driven by export-oriented projects while most of the additional production is expected for the second half of the forecast, shorter-term uncertainty on demand growth could negatively impact its development schedule. Production growth in the Middle East is driven by the ramping up of large conventional projects in Saudi Arabia, Iran, Israel, Iraq and Qatar – for which the oil price collapse and uncertainty represent a substantial downside risk in the first years of the forecast. The sector’s ability to rebound in a post-crisis environment will be pivotal to deliver the incremental gas production needed by the US market to replace its declining conventional production and supply its additional LNG export capacity under development. The US shale industry, the main driver of global gas output growth over the recent years, is particularly vulnerable in the current crisis context – the IEA report World Energy Investment 2020 estimates that upstream spending on shale tight oil and gas is set to decline by 50% y‑o‑y in 2020. Supply – If almost all regions are expected to contribute to the growth in natural gas production in the next five years, half of the net increase in supply comes from North America and the Middle East. Future growth in the industry sector, which constitutes the main driver of incremental gas demand in both countries, will however highly depend on the pace of economic recovery, both for domestic and export markets for industrial goods. In spite of the current economic headwinds and uncertainty, natural gas still benefits from strong policy support in both countries, with ongoing reforms to increase the role of gas in the energy mix. While the prospects of natural gas remain strong for these two markets, the outlook is highly dependent on China’s and India’s future policy direction and recovery path in the post-crisis environment. The Asia Pacific region accounts for over half of incremental global gas consumption in the coming years, driven principally by the development of gas in China and India. This forecast expects an average growth rate of 1.5% per year during this period. The impact of the 2020 crisis is, however, expected to have repercussions on the medium-term growth potential, resulting in about 75 bcm of lost growth over the forecast period, 2019 to 2025. It is on the industry to voluntarily take on these necessary steps before the order comes in the form of government regulation - “responsible” natural gas is the path forward.Demand - After a 4% drop in 2020, natural gas demand is expected to progressively recover in 2021 as consumption returns close to its pre-crisis level in mature markets, while emerging markets benefit from economic rebound and lower natural gas prices. Finally, a premium market for biogas/renewable natural gas (produced in landfills or feedlots) or green hydrogen-blended natural gas is likely to emerge on top of the stratums created by the various production of conventional natural gas. Other areas in which natural gas differentiation can occur through relative carbon intensity of its production process (conventional versus fracked gas, geological differences in respective shale plays). Improved monitoring of methane release in the upstream and midstream sectors is one important step in distinguishing various sources of natural gas and convincing the wider public of its superior climate attributes. Methane emissions created in production and transportation through leaks or venting are certainly a black eye for the industry, given methane’s status as a powerful greenhouse gas. ![]() G&A would suggest that this is only one aspect of differentiation that is likely to crop up in coming years. Much of the discussion on this topic currently focuses on differentiation of natural gas by relative “greenness” - as defined by the amount of methane emissions across the value chain. Market participants are increasingly calling for differentiation among natural gas which would help identify the environmental profile that each molecule of CH4 carries with it along the value chain. Natural gas is a fungible commodity by design and does not contain any distinguishing attributes depending on where or how it is produced. ![]()
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