Five Things to Know about the Global Natural Gas Market

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Steve Everley, Managing Director, FTI Consulting
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Last month, the Gastech conference took place in Houston, often referred to as the Energy Capital of the World. The sheer size of the conference (over 2,500 attendees) is a testament to how significant natural gas has become in the global energy equation.

FTI Consulting has had a front row seat for the rapid changes occurring in the global oil and gas market. We have supported industry-leading programs that educate the public about the shale revolution and the economic and environmental benefits it is delivering, across North America and beyond. We have also partnered with some of the leading players in the LNG space in every corner of the world.

Those engagements have given us valuable perspective on the current opportunities facing the industry, particularly with respect to natural gas. Informed by this experience and the discussions at Gastech, here are five key takeaways about the natural gas market in 2019 and beyond:

  • Strong Global Demand: “Gas is the fuel of the future,” said Nadeem Babar, the special assistant to the Prime Minister of Pakistan. Babar is right, but natural gas is also the fuel of today. The International Energy Agency (IEA) observed that natural gas accounted for 45% of the rise in global energy consumption last year, on its way to emerging as what the IEA deemed the “fuel of choice.” Demand for natural gas is growing so fast that last year, IEA increased its projected global natural gas demand in 2040 by 100 billion cubic meters. Over that same period, demand growth for natural gas will be the largest among all fossil fuels. It’s not surprising that Russell Hardy, the CEO of the world’s largest independent oil trader Vitol, said that “demand growth potential is huge” for liquefied natural gas (LNG) around the world.
     
  • Market Dominated by Asia, Especially India and China: Gastech was an opportunity to see just how hungry India is for affordable and reliable energy. Around seemingly every turn on the exhibit floor was another Indian company’s booth showing how they were investing billions of dollars in new natural gas infrastructure. India currently plans to build 11 new LNG import terminals over just the next 7 years. Meanwhile, the world’s most populous country, China, will be the global leader in demand for LNG as the country shifts away from coal, playing a key role in China’s “blue skies” initiative to reduce air pollution. According to the International Energy Agency, the Asia Pacific region is forecast to account for approximately 60% of total natural gas consumption growth between now and 2024.
     
  • Natural Gas Is a Climate Solution: Ashish Chatterjee with India’s Ministry of Petroleum and Natural Gas told the Gastech attendees that his country is “focusing on promoting natural gas” due to “concerns of carbon emissions.” Many of the topics covered by the panels and speakers at Gastech focused on that very issue, such as how natural gas can solidify its role in a low-carbon environment. Part of that, according to at least one company executive, is the industry making a more affirmative case for its accomplishments in reducing emissions, rather than just trying to reframe the discussion around natural gas. In the United States, natural gas has prevented approximately 2.4 billion metric tons of carbon dioxide emissions since 2005, helping the United States lead the world in reducing greenhouse gas emissions. A few years ago, much of the discussion around climate change at a natural gas conference may have been more on how climate policy could harm investment. Today, those policies are viewed as an opportunity.
     
  • Address Methane: While Gastech discussions were nearly unanimous in identifying the climate benefits of natural gas, there is still more work to be done. Industry leaders throughout the multi-day program stressed that reducing methane emissions must be a priority. One industry participant noted that to achieve the “full potential of the foundational role for gas,” the industry must focus on reducing methane throughout the LNG supply chain. But there is room for optimism, as new technologies are making emissions reductions easier and more cost effective. As Susan Dio from BP observed, reducing methane emissions is critical, and “innovation is going to play a key role.” Companies and governments are partnering on digital strategies and policies to reduce emissions and ensure natural gas retains its climate advantages. A recent report from the U.S. Department of Energy found that methane leakage rates would have to exceed 8% before U.S. LNG would lose its climate advantage in Asia, a rate that is 4 to 6 times higher than the latest estimates of U.S.-produced gas. The intense focus on methane at Gastech shows that the industry is not resting on its laurels, but actively partnering with innovators and environmental groups to minimize methane leakage.
     
  • An Opportunity for the U.S.: Over the next few years, the United States will become the world’s third largest exporter of LNG, behind only Qatar and Australia. Last month, the United States had already captured 10% of the global LNG market. Since at least 2012, the United States has been the world’s largest natural gas producer and recently became a net natural gas exporter. With a global market hungry for LNG and rapidly growing economies in Asia, the U.S. shale revolution has only increased in significance. In fact, the growth in natural gas production in the United States has provided economies around the world with more fuel choice, which means the shale revolution is shaping the global natural gas market rather than simply responding to it. There are dozens of applications at the U.S. Department of Energy to build new LNG export infrastructure or expand existing operations, yet another indication that the United States still has significant room to grow as a global LNG powerhouse.

With Asian markets set to dominate the global demand for natural gas for years to come, it’s only fitting that next year’s Gastech event will occur in Singapore. If current trends hold, then there will likely be even more optimism at Gastech 2020 than there was this year.

 

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