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Released June 27, 2019 | SUGAR LAND
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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--The global natural gas industry had a "bonanza" year in 2018, both from a production and consumption perspective, Spencer Dale, group chief economist for BP Plc (NYSE:BP) (London, England), said earlier this month in releasing the oil giant's 68th annual statistical review of world energy. And the U.S. was at the center of both production growth and demand growth, he added.
Click on the image at right to see a line graphic on global gas production and consumption changes in recent decades as well as a stacked bar chart comparing 2018 production and consumption gains with earlier years' averages.
Global production and global demand each increased by more than 5% in 2018, "one of the strongest growth rates in either gas demand or output for over 30 years," Dale said June 11 at a London press conference. "The main actor here was the U.S., accounting for almost 40% of global demand growth and over 45% of the increase in production." Other countries experiencing strong demand growth for gas last year were China, Russia and Iran.
"China's gas consumption grew by an astonishing 18% last year," Dale said at the press conference. "This strength stemmed largely from a continuation of environmental policies encouraging coal-to-gas switching in industry and buildings in order to improve local air quality, together with robust growth in industrial activity during the first half of the year."
Click on the image at right to see which sectors drove increased demand for gas in the U.S. and China last year.
U.S. natural gas production rose almost 12% in 2018, an increase of about 86 billion cubic meters (Bcm) or about 3.4 trillion cubic feet, driven by unconventional formations like the Marcellus, Haynesville and Permian, Dale continued. "In case there was any doubt: the U.S. shale revolution is alive and kicking."
The gas production gains in the U.S. were the largest increase in the 68 years that BP has prepared its annual statistical review of energy.
Weather-related changes were a big factor driving global gas demand upward last year, both for space heating as well as space cooling. Within the U.S. power sector, the retirement of about 17,000 megawatts of coal-fired generating capacity and the construction of new gas-fired replacement generation drove gas consumption upward, the BP chief economist said.
"Although some of the increase in U.S. gas supplies was used to feed the three new U.S. LNG trains which came on stream last year, the majority was used to quench the thirst of domestic demand," Dale continued. "U.S. gas consumption increased by 78 Bcm last year. To put that in context, that is roughly the same growth as achieved over the previous six years in the U.S., or broadly equivalent to the entire gas consumption of the U.K."
A big part of the 2018 natural gas story was the rise in global liquefied natural gas (LNG) trade, Dale commented: "Global LNG supplies continued their rapid expansion last year, increasing by almost 10% (37 Bcm) as a number of new liquefaction plants in Australia, U.S. and Russia were either started or ramped up." The gains in global LNG exports last year was only slightly less than the sharp increase in those exports in 2017, he added.
Click on the image at right to see a historical bar chart showing annual changes in LNG exports since 2009.
"For much of the year," Dale said, "the strength of Asian gas demand, led by China, was sufficient to absorb these increasing supplies. But a waning in the strength of Asian demand towards the end of the year, combined with a mini-surge in LNG exports, caused prices to fall back and the differential between Asian and European spot prices to narrow significantly. Asian prices have fallen further in the first part of this year, towards the bottom of the price band defined by U.S. exporters' full-cycle and operating costs. The prospect of further substantial expansion of LNG supplies this year means there is a possibility of a first meaningful curtailment of some LNG supply capacity."
Click on the image at right to see Asian spot prices for LNG and U.S. LNG exporters' costs.
Although Dale didn't discuss how the current tariff war between the U.S. and China is affecting U.S. LNG exports, news reports have claimed that the competitiveness of U.S. LNG exports has been undermined by China's 25% tariff on U.S. LNG shipments.
Shrinking Asian LNG margins could spell trouble for U.S. LNG developers, who have plans to build more than $100 billion of new domestic LNG export terminals.
"The prospect of LNG exports has boosted U.S. gas demand and encouraged producers to expand production and developers to propose LNG export terminals in recent years," commented Gordon Gorrie, Industrial Info's vice president of research for the Oil & Gas Production, Pipelines and Terminals industries. "We expect a few more trains will begin operating this year, but 2019 is a very different market from 2014: LNG prices today are one-quarter to one-fifth what they were in 2014."
"We expect several projects in an advanced stage of development, particularly where offtake contracts have been signed, will move forward in the next 12-18 months," Gorrie continued. "But those who were late to the party are going to have to make some hard decisions about continuing to invest money in projects where the payout is getting farther and farther away."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, eight offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
Click on the image at right to see a line graphic on global gas production and consumption changes in recent decades as well as a stacked bar chart comparing 2018 production and consumption gains with earlier years' averages.Global production and global demand each increased by more than 5% in 2018, "one of the strongest growth rates in either gas demand or output for over 30 years," Dale said June 11 at a London press conference. "The main actor here was the U.S., accounting for almost 40% of global demand growth and over 45% of the increase in production." Other countries experiencing strong demand growth for gas last year were China, Russia and Iran.
"China's gas consumption grew by an astonishing 18% last year," Dale said at the press conference. "This strength stemmed largely from a continuation of environmental policies encouraging coal-to-gas switching in industry and buildings in order to improve local air quality, together with robust growth in industrial activity during the first half of the year."
Click on the image at right to see which sectors drove increased demand for gas in the U.S. and China last year.U.S. natural gas production rose almost 12% in 2018, an increase of about 86 billion cubic meters (Bcm) or about 3.4 trillion cubic feet, driven by unconventional formations like the Marcellus, Haynesville and Permian, Dale continued. "In case there was any doubt: the U.S. shale revolution is alive and kicking."
The gas production gains in the U.S. were the largest increase in the 68 years that BP has prepared its annual statistical review of energy.
Weather-related changes were a big factor driving global gas demand upward last year, both for space heating as well as space cooling. Within the U.S. power sector, the retirement of about 17,000 megawatts of coal-fired generating capacity and the construction of new gas-fired replacement generation drove gas consumption upward, the BP chief economist said.
"Although some of the increase in U.S. gas supplies was used to feed the three new U.S. LNG trains which came on stream last year, the majority was used to quench the thirst of domestic demand," Dale continued. "U.S. gas consumption increased by 78 Bcm last year. To put that in context, that is roughly the same growth as achieved over the previous six years in the U.S., or broadly equivalent to the entire gas consumption of the U.K."
A big part of the 2018 natural gas story was the rise in global liquefied natural gas (LNG) trade, Dale commented: "Global LNG supplies continued their rapid expansion last year, increasing by almost 10% (37 Bcm) as a number of new liquefaction plants in Australia, U.S. and Russia were either started or ramped up." The gains in global LNG exports last year was only slightly less than the sharp increase in those exports in 2017, he added.
Click on the image at right to see a historical bar chart showing annual changes in LNG exports since 2009."For much of the year," Dale said, "the strength of Asian gas demand, led by China, was sufficient to absorb these increasing supplies. But a waning in the strength of Asian demand towards the end of the year, combined with a mini-surge in LNG exports, caused prices to fall back and the differential between Asian and European spot prices to narrow significantly. Asian prices have fallen further in the first part of this year, towards the bottom of the price band defined by U.S. exporters' full-cycle and operating costs. The prospect of further substantial expansion of LNG supplies this year means there is a possibility of a first meaningful curtailment of some LNG supply capacity."
Click on the image at right to see Asian spot prices for LNG and U.S. LNG exporters' costs.Although Dale didn't discuss how the current tariff war between the U.S. and China is affecting U.S. LNG exports, news reports have claimed that the competitiveness of U.S. LNG exports has been undermined by China's 25% tariff on U.S. LNG shipments.
Shrinking Asian LNG margins could spell trouble for U.S. LNG developers, who have plans to build more than $100 billion of new domestic LNG export terminals.
"The prospect of LNG exports has boosted U.S. gas demand and encouraged producers to expand production and developers to propose LNG export terminals in recent years," commented Gordon Gorrie, Industrial Info's vice president of research for the Oil & Gas Production, Pipelines and Terminals industries. "We expect a few more trains will begin operating this year, but 2019 is a very different market from 2014: LNG prices today are one-quarter to one-fifth what they were in 2014."
"We expect several projects in an advanced stage of development, particularly where offtake contracts have been signed, will move forward in the next 12-18 months," Gorrie continued. "But those who were late to the party are going to have to make some hard decisions about continuing to invest money in projects where the payout is getting farther and farther away."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, eight offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
