June 5 (Bloomberg) -- Natural-gas consumption may rise 17 percent by 2017 from last year as demand surges in Asia and the U.S., according to the International Energy Agency. China’s use of the fuel will double while Europe’s will remain below the level of 2010, it said.
Demand worldwide will climb by 576 billion cubic meters to 3.937 trillion, the Paris-based adviser to oil-consuming nations said today in its first Medium-Term Gas Market Report. That’s an average increase of 2.7 percent a year, which is similar to the growth during the last decade, the e-mailed report showed. Emerging nations will account for 69 percent of the gain.
“Asia will be by far the fastest growing region, driven primarily by China, which will emerge as the third-largest gas user by 2013,” the IEA said. “Europe looks for a floor and Americas for a ceiling.”
China’s gas consumption will rise to 273 billion cubic meters in 2017 from 130 billion in 2011, according to the IEA. The increase of 13 percent a year compares with an annual expansion of 20 percent over the past three years, it said.
U.S. demand will expand 13 percent to 779 billion cubic meters by 2017, according to the report. While Europe’s requirements will rise by 7.9 percent to 561 billion, that’s still below the 570 billion in 2010, the IEA said.
The rate of growth in China’s gas use depends on the nation’s construction of infrastructure to handle imports and domestic distribution and storage, the report shows. Wholesale and retail gas prices also need to be high enough to attract more expensive supplies such as liquefied natural gas, according to the agency.
Gas imports are expected to rise to 85 billion cubic meters from total consumption of 223 billion cubic meters in 2015, the report shows. About 47 billion cubic meters will be delivered as LNG, while 35 billion will be piped from Central Asia and 3 billion from Myanmar.
That’s still less than the 120 billion cubic meters that the nation may be able to receive from overseas by 2015, the IEA said. China has 26 billion cubic meters of LNG-receiving capacity under construction in addition to the 29 billion already operating, it said. A 12 billion cubic-meters-a-year link from Myanmar will start in 2013, and the annual capacity of the Central Asia pipeline is expected to reach as much as 60 billion by 2015.
Russian piped supplies to China remain an uncertainty, according to the IEA. While deliveries aren’t expected before 2017, imports from the nation will make up a significant part of Chinese purchases in the longer term unless China ramps up its production of shale gas rapidly, it said.
“There are no doubts that China will become a major importer of gas,” the IEA said. “The question for external suppliers is how much pipeline gas and LNG China will need in five or 10 years.”
Power generation will account for 66 percent of the increase in gas use in the Americas as utilities switch to the lower-cost fuel from coal, according to the report. Gas futures at the Henry Hub in New York fell to the lowest intraday price in 10 years on April 19 amid rising U.S. stockpiles and increased production of shale gas.
“The continued boom in unconventional gas in the U.S. may even herald the end of the hundred-year dominance of coal in U.S. power generation,” the IEA said. “In 2005, when the first shale well was fractured, coal produced almost three times as much power in the U.S. as gas. By 2017, the race will be almost even.”
Gas demand in Europe will be curbed by relatively high prices, slower economic growth, and the development of renewable energy, according to the agency.
U.K. gas for next-day delivery closed at 54.01 pence a therm on June 1. That’s equivalent to $8.31 per million British thermal units. U.S. gas for July delivery settled at $2.33 per million British thermal units on the New York Mercantile Exchange.
Power from wind and solar sources in Europe is expected to more than double from 179 terawatt-hours in 2010, while output from other renewable energy including bioenergy and geothermal will grow by about 50 percent, the IEA said.
“European industrials will not see any benefits of lower gas prices induced by shale gas developments,” according to the report. “In the power-generation sector, the boom of renewable energy sources actually results in declining generation by combustible fuels.”
The New Qatar
The volume of gas traded internationally may increase 35 percent from 2011 to 2017, including a 31 percent rise for LNG to 426 billion cubic meters in 2017, the IEA estimates. Growth will slow through mid-2014 before accelerating because only 25 billion cubic meters of a total 114 billion of liquefaction capacity under construction will come online during 2012 and 2013, according to the report.
“The global trade balance is visibly shifting to Asia, which is now attracting increasing flows of LNG and pipeline gas,” the IEA said. “Australia is set to become the new Qatar, with one plant started in May 2012, seven plants currently under construction and many others close to reaching final investment decisions,” the IEA said.
Qatar is the world’s biggest exporter of LNG, or gas cooled to a liquid for transportation by ship.
New liquefaction plants are being discussed in Australia, Russia, Nigeria, Tanzania, Mozambique and South Asia, according to the IEA. Cheniere Energy Inc.’s Sabine Pass gas-export terminal in Louisiana is likely to advance after receiving authorization from the Federal Energy Regulatory Commission in April, the agency said.
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