Cedigaz Sees Bright Future for Gas
French consultancy Cedigaz sees gas playing a "crucial role" in supporting the energy transition out to 2040, according to its outlook for gas published August 5. And this will be enabled by an acceleration in LNG trade – another trend that has been common to many energy outlooks published in the last year or so. Natural gas demand grows by 40% from 2017 to 2040, with Asia leading the way.
Continuing to echo the common theme of such outlooks, however, even that greater use of gas will not be enough to achieve the United Nations' +2 °C target for global warming: emissions in the Cedigaz scenario would put the world closer to a +3 °C path.
China accounts for one-third of the incremental gas demand over the outlook period and the Middle East is the second largest region, accounting for 23% of the total growth. Outside the US, unconventional development will be slow and concentrated in a few countries, with the largest growths expected in China, Canada and Argentina.
In Europe by contrast the long term growth of natural gas demand is uncertain and peak annual gas demand could be reached as soon as the middle of the next decade in the context of the policy-driven decarbonisation of the energy supply.
The future expansion of natural gas in the energy mix is driven by the competitiveness and abundance of gas resources in gas-rich markets such as North America, Russia, the Middle East and Mozambique. Unconventional gas, especially in the US, and LNG will continue to reshape natural gas supplies.
As the energy transition to a sustainable energy system accelerates, natural gas demand growth slows strongly after 2025 to 1.1%/year over the 15-year period, with 2%/year over 2017-2025. In absolute terms, natural gas demand records a volumetric gain of 1.442 trillion m³ over 2017-2040, accounting for 35% of the global energy demand growth.
Industry (mainly petrochemicals and manufacturing) and power generation account for respectively 44% and 40% of the global gas demand growth, with the largest contribution to the growth of gas-fired power generation coming from China, the Middle East and the US. Growth in the industrial sector is the strongest in China, the Middle East, the Americas (excluding Canada) and southeast Asia.
International LNG trade will grow by 3.2%/year to 2040 and long-distance (inter-regional) LNG trade will grow the fastest (+ 4.9%/year), driven by Asia. The share of LNG in interregional gas trade will progress from 39% in 2017 to 60% in 2040.
Considering a robust outlook for gas demand in China based on official announcements, China’s LNG demand could quadruple to around 200bn m³ by 2040, representing a quarter of the global LNG market. LNG supply will alter towards a declining market share of Asia-Oceania and the Middle East, while the US steadily expands its supplier position.
Post-2025, Qatar and the US have the potential to become the two leading LNG exporters, each representing a LNG market share of more than 20%. Mozambique, Russia, and to a lesser extent, Canada, will also provide a growing contribution to global LNG supply. LNG market should remain well-supplied until at least the middle of the next decade assuming likely additional FIDs (including Qatar expansion projects) in the near future. In case of projects’ delays, some tensions could however occur over the 2023-2024 period.
As of August 2019, it is estimated that only 10mn metric tons/yr of new LNG capacity, in addition to current operating and post-FID projects, are required to meet international LNG demand in 2025. But thereafter, this supply gap grows rapidly to 75mn mt/yr in 2030; 140mn mt/yr in 2035; and almost 200mn mt/yr in 2040.