Demand for natural gas to rise 3.4% every year up to 2035
By Sudeep Sonawane
Surat, August 17, 2021
Qatar continues to expand its output while the rest of the world deals with the end of affordable natural gas as demand outstrips supply.
Data shows supplies will fall short, says a Bloomberg report. “Beyond a massive expansion in Qatar, few new LNG export projects received clearance since the start of 2020”.
In February this year, Qatar Petroleum (QP), the world’s top liquefied natural gas (LNG) supplier, signed a contract for the first phase of its North Field LNG project expansion. This will boost the Qatar’s LNG output by 40% a year by 2026.
QP signed the contract for a joint venture with Chiyoda and Technip that covers major onshore engineering, procurement and construction at the expansion project.
The expansion will boost Qatar’s LNG production capacity to 110 million tonnes per annum (mtpa) from 77 million mtpa. This is the largest single LNG project ever to be sanctioned.
The Minister of State for Energy and QP President and CEO Saad Sherida Al-Kaabi and KOGAS President and CEO Hee-Bong Chae signed the contract at QP headquarters in Qatar. Qatar will start LNG supplies in January 2025 to KOGAS’ LNG receiving terminals in South Korea.
Shale gas drillers in the US are slow in boosting output. They face pressure from investors to limit spending. Major pipeline projects lack momentum.
Natural gas supply was high and affordable most of the last decade. Generous supply from the US, Australia and other key states like Qatar spurred this.
The happy state changed in 2021 as demand surged and supply choked. “European gas rates reached a record this week, while deliveries of the liquefied fuel to Asia are near an all-time high for this time of year,” the Bloomberg report says.
European natural gas rates have surged more than 1,000% from a record low in May 2020 because of the pandemic, while Asian LNG rates have jumped about six-fold in the last year. Prices in the US, where the shale revolution has boosted fuel production, have rallied to the highest level for this time of year in a decade.
Several reasons have pushed gas prices higher. They include supply disruptions, global economic rebound and a lull in new LNG export plants. Experts agree the world faces a shift, driven by the energy transition.
Natural gas will remain transition fuel for many years as countries try to fulfil carbon emission goals, energy analysts opine. Gas prices will remain high over the medium-term and increase over the longer-term, they say.
Natural gas is the cleanest burning fossil fuel. It emits almost 50% less CO2 than coal. Non-fossil-fuel alternatives such as wind and solar continue to evolve and remain in early stage of energy transition.
The International Energy Agency forecasts demand to rise 7% by 2024 from pre-pandemic levels. McKinsey & Co expects demand for liquefied natural gas (LNG) to rise 3.4% every year by 2035 and outpace other hydrocarbon fuels.
Increase in natural gas prices will surge production cost of petrochemicals. This will affect global economy and trigger inflation. Consumers will receive higher utility bills.
Countries switch to clean fuel
Utilities in Europe have switched to cleaner-burning gas because of high carbon prices. South and Southeast Asian governments have planned dozens of new gas-fired plants to meet greater electricity needs. China will depend more than ever on gas as it seeks to peak coal consumption.
Countries switch to clean fuel
Utilities in Europe have switched to cleaner-burning gas due to high carbon prices. South and Southeast Asian governments have planned dozens of new gas-fired plants to meet greater electricity needs. China will depend more than ever on gas as it seeks to peak coal consumption.
Higher prices over the next ten years will not reduce demand for fuel. Policy support in developing economies will not trim demand, experts say. Higher demand will spur investment in export facilities.
No new capital investment keeps gas prices higher. With no new investments, LNG consumption in Asia will outstrip supply by 160 million tons in 2035.
Further, environment concerns over methane emission levels have slowed projects. The increased scrutiny on emissions has compelled major gas producers to revise their plans.
The IEA, which heralded natural gas as a bridge fuel to a low carbon future, drew widespread attention earlier this year when it said investments in new upstream fields need to stop if the world wants to hit net-zero emissions by 2050.
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