Teekay’s Marine Market Analyst Christian Waldegrave provides insight into the global LNG market in the second quarter 2012, including a look at how Japan is currently relying on LNG instead of nuclear energy.
Both the consumption of natural gas and demand for LNG have been increasing in recent years due to a number of factors:
Global economic growth and energy demand are increasing.
Natural gas is a cleaner burning fuel than coal and oil, encouraging an increase in power plants that run on natural gas.
Natural gas is widely applicable as a fuel source for power generation, industry and commerce.
The consumer trend is to greater diversity of fuel sources.
The natural gas market is undergoing deregulation in several key markets.
LNG prices have dropped as the cost of liquefaction and regasification have declined. This is due to improved technology, efficiency gains and more competition.
LNG vessel construction costs have declined, resulting in lower shipping costs.
Domestic gas production in many areas is insufficient to meet rising energy demand.
A Growing Global Market
Total demand for natural gas is projected to increase from 3,149 billion cubic meters (bcm) in 2008 to 4,535 bcm in 2035. This is a 44% increase over the period at an average annual growth rate of 1.4%.
84% of the increase in global gas use in the period to 2035 is expected to come from non-OECD regions. Chinese demand is expected to grow by 5.9% p.a., more than any other region, driven by booming demand in the power, residential and industrial sectors. Demand in the Middle East, non-OECD Asia (in particular India) and Latin America is also expected to grow rapidly over the forecast period.
Despite much less rapid economic growth, North America and Europe still account for 12% of the expected growth in world gas consumption to 2035. In many cases, gas continues to be the favored choice over coal and oil for environmental reasons, especially in power generation. In Europe, carbon penalties help gas to compete against more carbon-intensive coal in the power sector and heavy industry.
Inter-regional natural gas trade is projected to increase from 670 bcm in 2008 to 1,187 bcm in 2035. This is a 77% increase over the period at an annual average rate of 2.1%. Trade rises much faster than demand due to the pronounced geographical mismatch between regions of production and consumption.
The volume of LNG trade is projected to increase from 210 bcm in 2008 to 500 bcm in 2035. The share of LNG in total natural gas trade versus pipelines is projected to grow steadily from 31% in 2008 to 42% in 2035.
Japan, Korea and India are the biggest Asian importers. In 2009 these countries received about 55 percent of total global LNG trade. Spain, France and the US are the Atlantic Basin’s biggest importers closely followed by the UK. China is currently the world’s ninth largest LNG importer and is expected to become a major buyer of LNG in the future.
Qatar, Malaysia and Indonesia are the biggest producers accounting for 44% of all LNG exports in 2009. Other major producers include Nigeria, Algeria, Australia and Trinidad & Tobago.
The pattern of global LNG trade is expected to change in the future. Up to now LNG trade has been concentrated in the Asia-Pacific region with gas sourced from Asia and the Middle East. Although this market will continue to expand, LNG demand from the Atlantic basin is also expected to increase.
As of June 2010 global liquefaction capacity totaled around 360 bcm per year. An additional 77 bcm per year is under construction while a further 500 bcm per year is currently in the planning stage. Australia, Nigeria, Iran and Russia account for 77% of the planned new production capacity, though not all of these projects are expected to come online due to political and economic barriers.
The global LNG fleet is growing rapidly to meet increasing demand. As of November 2010 there were 360 LNG vessels in service with a further 24 vessels on order.
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