Natural Gas May Enter ‘Golden Age’ on Chinese Demand, IEA Says
Natural gas may enter a “golden age” led by demand increases in China and the Middle East as new gas-fired power stations are built, the International Energy Agency said.
Global gas demand may surge as much as 44 percent to 2035 over 2008 levels, reaching 4.5 trillion cubic meters a year (435 billion cubic feet a day) as China’s use grows an average 6 percent a year annually, the adviser to developed nations said in its World Energy Outlook 2010, published today.
“China could lead us into a golden age for gas,” the IEA said. “Demand in the Middle East increases almost as much.”
Gas demand will return to growth this year after dropping in 2009 in the wake of the economic crisis and global oversupply, the Paris-based IEA said. Gas is the only fossil fuel for which demand in 2035 is higher than in 2008 across all of the IEA’s three assumptions for climate legislation.
China produced about 85 billion cubic meters of gas last year and consumed about 89 billion, according to BP Plc’s Statistical Review of World Energy. More than 70 percent of the country’s energy comes from coal, the most polluting fossil fuel. The country has three operating LNG terminals, with another 16 planned or proposed import facilities. It also imports gas through a pipeline from Turkmenistan.
Middle Eastern gas use is likely to grow almost as fast as in China, according to the IEA. Still, the region may double its production to 800 billion cubic meters a year by 2035.
More than a third of the worldwide increase in production over the quarter century is expected to come from so-called unconventional gas deposits of shale, coal-bed methane and tight gas, the IEA said. Such production will be concentrated in North America, spreading to the Asia-Pacific region, the agency said.
Oil Price Indexation
A “gas glut” in supply capacity will exceed 200 billion cubic meters next year, from 130 billion this year, the IEA said, before starting “a hesitant decline.” The agency defines the glut as the capacity of inter-regional pipelines and LNG export plants minus the volume of gas actually traded.
“This glut will keep the pressure on gas exporters to move away from oil-price indexation, notably in Europe, which could lead to lower prices and to stronger demand for gas than expected, especially in the power sector,” the IEA said.
In Europe, most gas is sold under multiyear contracts linked to the cost of crude and oil products. Still, the fuel is increasingly traded at hubs and priced independently from oil.
The IEA study assumes nations implement broad policy commitments to climate change. The organization also looked at a scenario assuming current climate legislation and one that assumes steps to limit global warming to 2 degrees Celsius (3.6 degrees Fahrenheit).
To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net
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