Continuous demand growth, alongside new supply sources, will transform the gas market import and export balances by 2022, Energy Insights, data and analytics specialist part of McKinsey & Company said in its new report Global Gas & LNG Outlook to 2035.
This transformation will be driven by significant global gas demand growth of approximately 300 billion cubic meters by 2022, with Asia accounting for around 50 per cent of that additional demand, the report said.
Buyers in China will increasingly rely on LNG imports as domestic supply growth and incremental pipeline inflows are expected to be insufficient to meet rapidly growing policy-led demand. On the supply side, declining production in Europe and increasing North American supply will impact market dynamics.
“Changes to the domestic supply and demand balance of different countries will impact their international gas trade exposure through to 2022,” said Dumitru Dediu, associate partner with Energy Insights. “The market is moving rapidly and new import and export players are emerging to meet buyers’ needs for flexibility and increasing market liquidity.”
“China will continue to play a key role in gas market dynamics. As its demand growth continues at pace, China is expected to meet this by pulling on all three delivery mechanisms: increased domestic production, expanded pipeline imports, and additional LNG imports. This demand change can have significant consequences on the market meaning stakeholders in this space need to keep a close eye on market shifts.”
Overall, Energy Insights expects gas market growth at 1 per cent per annum until 2035 in its reference scenario. In addition, 3-4 per cent growth per year long-term, LNG will continue to outpace piped gas growth. With more LNG capacity coming on-stream in the Atlantic basin and demand driven by the Pacific basin, the need for LNG cargoes passing the Panama Canal may increase from one cargo per day to three to four cargoes over the medium-long-term.
In terms of global gas price economics, new LNG projects from the U.S. set the bar for projects worldwide, the report said. They also provide LNG buyers with an investment alternative to secure long-term supply at competitive prices, especially in a higher oil price environment.