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IEA 2019. All rights reserved.

Gas 2019Keisuke Sadamori, Director, Energy Markets and SecurityTokyo, 13 June 2019

IEA

IEEJ：July 2019 © IEEJ2019

2IEA 2019. All rights reserved.

Gas demand jumped by 4.6% in 2018, accounting for nearly 45% of overall demand growth.

2018 was another golden year for gasAverage annual change in global primary energy demand, 2010-18

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2010-16 2017 2018

Mtoe

Energy demand

Natural gas

The United States led the growth due to relatively low prices and weather, China followed, driven by the push for ‘blue skies’.

China

UnitedStates



China accounts for over 40% of global gas consumption growthAll sectors contribute to growth

World natural gas consumption growth for selected countries and regions, 2018-24

Fast growing Asian markets drive future gas demand

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JapanRussia

EuropeOther Eurasia

South and Central AmericaOther North America

AfricaIndia

United StatesOther Asia Pacific

Middle EastChina

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JapanRussia

EuropeOther Eurasia


AfricaIndia


Middle EastChina

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IndustryPower generationResidential and commercialEnergy industry own useTransport

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JapanRussia

EuropeOther Eurasia


AfricaIndia


Middle EastChina

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Industry Other sectors

, with industry taking the lead in most markets



The growth in LNG as a marine fuel is supported by two main segments – cruise ships and container ships – which account for 80% of expected consumption by 2024

LNG emerges as an alternative marine fuel

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Other

Cruise ships

Container ships

LNG consumption for maritime shipping by main segment, 2018-24



The United States and China account for over half of total production increment to 2024US and Eurasian exports dominate LNG and pipeline trade growth

Contributors to natural gas production and export growth, 2018-24

The United States leads production and exports growth

Production

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United States ChinaProduction

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United States China Middle EastRussia Other Eurasia EgyptAustralia Other Africa South and Central America

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Exports

Production

United States China Middle EastRussia Other Eurasia EgyptAustralia Other Africa South and Central America



Associated shale strongly contributes to short-term production growth up to takeaway infrastructure limits and then slows with lesser LTO growth

US natural gas production reaches 1 tcm mark by 2024

Natural gas production, United States, 2014-24

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2014 2016 2018 2020 2022 2024

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Other sources

Dry shale - other

Dry shale - Appalachia

Associated shale - other

Associated shale - Permian

Domestic consumption



Global LNG trade grew at an average 10% per annum in between 2016 and 2018, with strong import increases from emerging Asian markets, as well as Korea and Europe (in late 2018).

LNG drives global gas trade development

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Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

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Japan and Korea China Other Asia Europe Other regions Annual average

Evolution of LNG imports, quarterly volumes and annual averages, 2015-19



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China Japan Europe India

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2014 2016 2018 2020 2022 2024

United States Australia Qatar Russia

Fast growing Asian economies and Europe account for over 95% of the increase in LNG importsUS exports surge while Australia reaches a plateau and Qatar prepares for expansion*

The United States and China become #1 LNG seller and buyer in 2024

World LNG trade for a selection of importers and exporters, 2014-24

LNG Imports LNG Exports

* Considering operating liquefaction plants, projects under construction or with FID as of May 2019



Europe needs to source imports to cover one-third of its demand by 2024, due to sharp declines in its own production & the expiry of pipeline long-term gas import contracts

Europe’s supply gap increases

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2014 2016 2018 2020 2022 2024

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Domestic production Long term pipeline contracts Additional supply needed

Domestic production and contracted pipeline vs import needs, Europe, 2014-24



2018 and early 2019 mark a return to LNG investment growth, with a strong list of additional projects announced to take FID in the course of the year

LNG export projects final investment decisions and announcements, 2016-19

Will 2019 mark the beginning of a new LNG investment cycle?

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ity (b

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Canada Indonesia Mauritania/Senegal Mozambique Qatar Russia United States

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Due to announceFID in 2019

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2019(as of early June)



New investments in liquefaction and shipping will support LNG trade development but additional capacity will be required to ensure future growth

More investment will be needed in LNG capacity before 2024

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Needs Capacity Utilisation rate

Liquefaction (available capacity)

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Utilisation rate

vess

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(174

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eq.)

Shipping fleet

LNG liquefaction and shipping fleet utilisation rates, 2016-24



Gas markets in major regions are closing the price gap thanks to the development of global LNG tradeThe Asian spot market still faces a higher degree of price volatility

Towards a global convergence of natural gas prices?

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USD

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Europe (TTF) North America (Henry Hub) Asia (Asian LNG spot)

Evolution of natural gas spot market prices, 2014-19



Market pricing currently dominates in North America and Europe Reforms are underway in major developing markets to enable sustainable gas growth

Pricing remains a challenge in developing markets

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North America Asia Pacific Eurasia Europe Middle East Central andSouth America

Africa

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Regulated prices Oil indexation Market pricing

Natural gas consumption and price mechanisms per region, 2018, and growth to 2024

Based on IGU, Wholesale Gas Price Survey (2019)

– but 85% of growth will take place in other regions

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Regulated prices Oil indexation Market pricingDemand increase to 2024



Conclusions

• Natural gas demand will continue to grow in the medium-term, driven by emergingAsian economies – and led by China.

• Although production increases in many regions, most of additional exports will comefrom US LNG and Eurasian pipeline.

• LNG trade remains the main driver of gas market globalisation, and a major source ofincremental supply for Asia and Europe.

• This growth is supported by a rebound in investment, but additional capacitydevelopment will be necessary before 2024.

• Market prices are converging as global LNG trade expands, and the share of market-driven pricing is increasing in all regions.

• Current gas reforms in major emerging economies are a prerequisite to ensurecompetitive pricing and sustainable growth in the longer term.



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