World consumption of natural gas grew by just 1.4% in 2013, well below the historical average of 2.6%, according to the latest statistical review of world energy from BP. Coal remained the fastest-growing fossil fuel, with consumption rising by 3%. Overall demand for energy accelerated in 2013, growing at 2.3%, slightly below the historical average but up from just 1.8% in 2012.
Launching the 63rd statistical review at the World Petroleum Congress in Moscow, CEO Bob Dudley said the 2013 data revealed three broad themes: “emerging differences in global economic performance, geopolitical uncertainty, and ongoing debates about the proper roles of government and markets”.
Significant shifts: Emerging economies continued to dominate energy demand growth, accounting for 80% of growth in 2013 and 100% of growth over the past decade. However, consumption trends showed significant shifts, largely as a result of changes in the United States and China.
Consumption growth in the OECD nations has been flat over the past decade, despite economic growth over that period of 18%. Meanwhile, in the non-OECD nations, stronger economic growth and industrialisation has led to continued consumption growth. According to BP’s chief economist Christof Rühl, “2013 broke this pattern”.
In his customary detailed commentary on the 2013 data, Rühl said: “OECD energy demand rose by 1.2%, offsetting an equal decline the previous year, despite slowing and lacklustre economic performance – almost on a par with GDP growth of 1.3%. Non-OECD energy consumption, in contrast, grew by only 3.1%, the slowest rate for 13 years, except for the crisis year 2009 – and substantially below GDP growth of 4.8%.”
The OECD acceleration was driven by growth in North America, the only region to record above-average growth, largely due to trends in the US. Primary energy consumption in the US was up 2.9%, rebounding from a 2.8% decline in 2012. “Much of this is due to weather effects,” said Rühl, “but beyond the weather, there are signs of underlying strength in US industrial sector energy use.”
In China, energy growth fell from 7.0% to 4.7%, well below the ten-year trend of 8.6%, despite the government reporting unchanged economic growth of 7.7%. “All told,” said Rühl, “the diverging performance of China and the US caused the ‘energy gap’ between non-OECD and OECD energy consumption growth to narrow sharply. It became the smallest since 2000.”
Over the past decade, OECD energy demand had flattened off, while non-OECD demand has overtaken it. Meanwhile, the divergence of energy prices has started to narrow. (Source: BP)
Gas slow-down: Last year also saw significant shifts in gas markets, said Rühl. “Natural gas markets are slowly transforming themselves, on the back of two developments: the shale gas revolution in the US and the increasing integration of hitherto segmented regional markets, supported by the rapid expansion of LNG. In 2013, these forces took a breather – US shale gas production growth slowed, and LNG expansion remained very modest.”
Growth of production, consumption and trade all slowed and regional price differentials narrowed (see chart above), with the demand slow-down “most pronounced in the developing world”.
In the US, gas production slowed to 1.3% in 2013, down from 5% in 2012 and 7.3% in 2011. “It has nothing to do with running out of shale – as some pundits have claimed,” said Rühl, “and everything to do with the fungibility of drilling rigs and the power of price signals.” Although prices rebounded from a 13-year low in 2012, they did not rise enough to accelerate production growth “because of the persistently high oil-gas price differential”, making it more attractive to “chase liquids”. Most of the growth in 2013 was from associated and wet shale gas; dry gas production fell.
One consequence of higher prices and other factors was a fall in gas demand for electricity generation, with gas-fired generation falling by 8.9% and coal-fired generation rising by 5%.
Meanwhile, China recorded the largest increase in gas consumption, with a rise of 10.8% or 15.3 Bcm, as the government made progress towards its target of increasing the share of gas in the energy mix. Production was up by 9.5% or 9.9 Bcm, creating room for an increase in imports by pipeline and in the form of LNG.
LNG lull: As Gastech News has already reported, LNG supply growth was much lower in 2013 than it has been over the past decade. BP reports an increase of just 0.6% last year. “This is keeping markets tight,” said Rühl, “allocating flexible cargoes to those willing and able to pay high prices. Small wonder, then, that we are witnessing massive adjustments. Asia, where fully 81% of all natural gas imports are met by LNG, remained the prime destination, with almost 75% of all cargoes headed that way.”
Japan remained the largest LNG importer, with post-Fukushima demand at record levels, but growth has levelled off because gas-fired generation is running at full pelt to compensate for the loss of all of Japan’s nuclear generation capacity. South Korea saw the largest import growth, partly because of problems with its nuclear fleet.
In Europe, gas production and consumption were down. “EU production appears in terminal decline,” said Rühl, “and consumption reached the lowest level since 1999. In 2013 consumption fell by 1.1% and production by 0.5%, and imports declined slightly.” Demand continues to face competition in electricity generation from coal and renewables.
Renewable challenges: Commenting on the growth of renewables, Bob Dudley said: “The importance of policy is . . . apparent in the strength of renewable forms of energy, which continued to grow robustly, albeit from a low base . . . The challenge of sustaining expensive subsidy regimes, however, has become visible where penetration rates are highest, namely the below-average growth of Europe’s leading renewable producers, who are grappling with weak economic growth and strained budgets.”
By Alex Forbes
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