Natural Gas production forecast

Despite decline in oil prices, natural gas demand outlook
February 11, 2017 – 05:20 am

150529_MTGMR_coverWeakness in Asia weighs on IEA’s five-year forecast

Lower prices will feed a pick-up in global natural gas demand over the next five years following a marked slowdown in 2013 and 2014, the International Energy Agency (IEA) said Thursday in its 2015 Medium-Term Gas Market Report. Nevertheless, the growth in demand will fall short of previous forecasts.

The annual report, which gives a detailed analysis and five-year projections of natural gas demand, supply and trade developments, sees global demand rising by 2% per year by the end of the forecast period, compared with 2.3% projected in last year's outlook. A significant reason for the downward revision is weaker gas demand in Asia, where persistently high gas prices until very recently caused consumers to switch to other options.

"One of the key – and largely unexpected – developments of 2014 was weak Asian demand, " said IEA Executive Director Maria van der Hoeven. "Indeed, the belief that Asia will take whatever quantity of gas at whatever price is no longer a given. The experience of the past two years has opened the gas industry's eyes to a harsh reality: in a world of very cheap coal and falling costs for renewables, it was difficult for gas to compete."

Asian gas prices are indexed, or linked, to those for oil. For several years, as oil prices hovered over USD 100/barrel, that meant Asian consumers were paying a hefty premium for their gas compared with buyers in other parts of the world. The rout in oil prices that began in mid-2014 has spilled over to natural gas markets in Asia and allowed the Asian premium to narrow substantially. But demand for gas in Asia may not recover as quickly as the drop in prices.

In the short term, gas demand will benefit from plunging prices, but the report adds that the long-term outlook for gas has become more uncertain – especially in Asia. A few Asian countries have decided to move ahead with plans to expand coal-fired power generation instead of gas-fired generation. "For the fuel to make sustained inroads in the energy mix, confidence in its long-term competitiveness must increase, " the report says.

Source: www.iea.org
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