Released June 11, 2020 | SUGAR LAND
en
Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Global demand for natural gas will fall 4%, about 150 billion cubic meters (Bcm) or 5.3 trillion cubic feet (Tcf), this year, a historic pullback that is double the decline experienced in the 2008-09 financial crisis, the International Energy Agency (IEA) (Paris, France) said in its Gas 2020 report, released June 10.
Click on the image at right to see a chart of changing levels of global gas demand, on a year-over-year basis.
The COVID-19 pandemic is not the only factor pushing down expected gas use this year. The pandemic followed an "exceptionally mild winter in the northern hemisphere," Keisuke Sadamori, the IEA's director for energy markets and security, said in a media briefing.
The agency noted that, year to date, all major gas markets worldwide are experiencing either falls in demand or slumps in growth. It expects mature markets such as North America, Europe and Asia will account for about 75% of this year's decline in demand.
Noting that the demand for gas will fall by less than the demand for coal or oil, Sadamori predicted U.S. gas demand for 2020 would fall about 5% below 2019 demand levels. Europe will see an even steeper decline, about 9%, he predicted.
Worldwide gas demand is expected to recover in 2021, gaining back all of 2020's losses. But the IEA does not assume the gas business will have a rapid return to "business as usual" in the years after 2021.
Notably, while mature economies such as Europe and North America are expected to absorb about three-quarters of this year's decline in demand, China, India and other emerging markets are expected to account for most of the demand growth in the 2021-2025 period. Policies supporting natural gas use in those countries will drive a lot of demand growth there.
Click on the image at right to see the IEA's projection of gas demand for 2019-2020 through 2025.
Falling global demand, coupled with rising production, particularly in the U.S., has pushed down prices to levels not seen since 1999, Sadamori said. This is particularly true for liquefied natural gas (LNG) in Asia, he continued. LNG prices in Asia have fallen about 62% between January 1 and June 1, to a recent level of about $2 per million British thermal units (MMBtu).
Click on the image at right to see declining gas prices year-to-date for major global markets.
Commenting on the Gas 2020 report, Jesus Davis, Industrial Info's North American specialist for the Oil & Gas Production, Pipelines and Terminals industries, said: "One factor pushing down European natural gas prices is the current high level of gas in storage. That, in turn, stems from the warm winter and demand reductions caused by the COVID-19 pandemic. European gas inventories are at a seasonal record of 73% of capacity, compared with the five-year average of about 45%. There even are talks of prices going negative in August-September, if things continue at the current pace. Negative prices are not unprecedented: U.K. prices went negative in October 2006, after a pipeline from Norway came into service when U.K. gas storage capacity was 96% full."
The IEA predicted the COVID-19 pandemic "will have a lasting impact on future market developments, dampening growth rates and increasing uncertainties." That applies to natural gas development in general, but doubly so for remote projects tied to LNG export terminals.
Sadamori noted the "massive" global buildout of global LNG terminals in 2018-19, which added about 90 Bcm of liquefaction capacity (around 3.2 Tcf). There is far more capacity than needed, he said, which means LNG likely will have a multi-year "sluggish recovery."
Click on the image at right to see a chart of global LNG capacity and utilization from 2015 to 2025.
Slower growth in global gas demand in the coming years is likely to result in LNG capacity outpacing LNG imports through 2025, leading to a "loose" market, where supply exceeds demand and prices are low, Sadamori said. A "loose" market "will cast a shadow on future investments in production and infrastructure, and could also place at risk production from some existing fields."
While Sadamori said the IEA expects the global economy to gradually recover over the next two years, he also said that projection was based on no "second wave" of COVID-19. If a second wave materializes, it would lower the outlook for a global economic recovery, and thus a recovery of worldwide gas markets.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 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/.
The COVID-19 pandemic is not the only factor pushing down expected gas use this year. The pandemic followed an "exceptionally mild winter in the northern hemisphere," Keisuke Sadamori, the IEA's director for energy markets and security, said in a media briefing.
The agency noted that, year to date, all major gas markets worldwide are experiencing either falls in demand or slumps in growth. It expects mature markets such as North America, Europe and Asia will account for about 75% of this year's decline in demand.
Noting that the demand for gas will fall by less than the demand for coal or oil, Sadamori predicted U.S. gas demand for 2020 would fall about 5% below 2019 demand levels. Europe will see an even steeper decline, about 9%, he predicted.
Worldwide gas demand is expected to recover in 2021, gaining back all of 2020's losses. But the IEA does not assume the gas business will have a rapid return to "business as usual" in the years after 2021.
Notably, while mature economies such as Europe and North America are expected to absorb about three-quarters of this year's decline in demand, China, India and other emerging markets are expected to account for most of the demand growth in the 2021-2025 period. Policies supporting natural gas use in those countries will drive a lot of demand growth there.
Falling global demand, coupled with rising production, particularly in the U.S., has pushed down prices to levels not seen since 1999, Sadamori said. This is particularly true for liquefied natural gas (LNG) in Asia, he continued. LNG prices in Asia have fallen about 62% between January 1 and June 1, to a recent level of about $2 per million British thermal units (MMBtu).
Commenting on the Gas 2020 report, Jesus Davis, Industrial Info's North American specialist for the Oil & Gas Production, Pipelines and Terminals industries, said: "One factor pushing down European natural gas prices is the current high level of gas in storage. That, in turn, stems from the warm winter and demand reductions caused by the COVID-19 pandemic. European gas inventories are at a seasonal record of 73% of capacity, compared with the five-year average of about 45%. There even are talks of prices going negative in August-September, if things continue at the current pace. Negative prices are not unprecedented: U.K. prices went negative in October 2006, after a pipeline from Norway came into service when U.K. gas storage capacity was 96% full."
The IEA predicted the COVID-19 pandemic "will have a lasting impact on future market developments, dampening growth rates and increasing uncertainties." That applies to natural gas development in general, but doubly so for remote projects tied to LNG export terminals.
Sadamori noted the "massive" global buildout of global LNG terminals in 2018-19, which added about 90 Bcm of liquefaction capacity (around 3.2 Tcf). There is far more capacity than needed, he said, which means LNG likely will have a multi-year "sluggish recovery."
Slower growth in global gas demand in the coming years is likely to result in LNG capacity outpacing LNG imports through 2025, leading to a "loose" market, where supply exceeds demand and prices are low, Sadamori said. A "loose" market "will cast a shadow on future investments in production and infrastructure, and could also place at risk production from some existing fields."
While Sadamori said the IEA expects the global economy to gradually recover over the next two years, he also said that projection was based on no "second wave" of COVID-19. If a second wave materializes, it would lower the outlook for a global economic recovery, and thus a recovery of worldwide gas markets.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 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/.
