Moderate growth in global gas demand in 2016

Global natural gas consumption grew 1.6% to 3,528bn cm in 2016, according to Cedigaz, driven by a range of structural and temporary factors. The growth in demand was similar to that of the previous year and also in line with Cedigaz’ short- and medium-term natural gas demand forecasts.

According to the international gas association’s latest analysis, more affordable natural gas prices in 2016 gave a boost to natural gas and LNG demand in both industrialised Europe and emerging markets. In addition, colder than usual temperatures in the final months of 2016 in the main consuming markets had a strong upward effect on domestic gas sales. However, this was partly offset by moderate global economic activity, a decline in energy intensity, weak electricity demand in OECD markets and the strong expansion of renewables, all of which continue to impact today’s market. In addition, Cedigaz also notes that if climate effects are set aside, the expansion of natural gas demand remained below the historical average. In the first three quarters of 2016, it increased at an estimated rate of only 0.5%, relative to the same period the previous year.

Demand growth varied across regions. The largest rises in gas demand were recorded in Europe (+6.1%), the Middle East (+3%), India (+9.5%) and China (+8%), contrasting with mixed results in the rest of Asia (–2%), North America (+0.2%), the CIS (+0.1%) and Latin America (–1.3%).

‘Faced with low oil prices and harsh conditions in the upstream sector, global gas production was sluggish in 2016,’ reports Cedigaz. Provisional estimates show a relative stagnation of global natural gas supply in 2016, marking a break after a continued growth of 1.8%/y on average during the five previous years.

Meanwhile, international gas trade increased much faster than global gas demand, up 5.5% to 1,094bn cm, propelled by both pipeline trade (+ 5%) and LNG flows (+ 6.7%). ‘This difference attests to the growing regional and local imbalances resulting from natural gas shortages in many markets, where production does not keep pace with domestic demand,’ says Cedigaz. However, natural gas markets remained well-supplied in 2016. That said, an expected LNG surplus did not materialise in 2016 because of delays in project start-ups and technical problems at some LNG trains. ‘Relatively abundant and low-priced LNG supply have opened a window of opportunity for natural gas and LNG, especially in the booming and price-sensitive emerging markets, where LNG has become a natural choice to address the shortfall between gas supply and demand’ notes Cedigaz.

Pic source: Shell

Petroleum Review will be taking a closer look at global LNG developments in its July issue.