Outlook for natural gas demand and supply in APEC: Natural gas demand in APEC under the BAU scenario is projected to reach nearly 2 854 Mtoe by 2040, an increase of 74% compared to 2013. With an average annual growth rate (AAGR) of 2.1%, gas is the fastest growing fossil fuel in the region and second fastest growing fuel after renewables. Most of the demand increase occurs in economies endowed with large gas reserves. Six economies (Canada, China, Indonesia, Mexico, Russia and the United States) account for 84% of APEC total natural gas.
In transition to cleaner energy options, gas has been identified as one of the fuels that can be used to mitigate environmental impacts in the short term. Use of gas is also seen as a means of diversifying the fuel mix to secure supply, particularly in power generation. As more than half of the global demand and production of natural gas is located in APEC, development of shale gas resources could help member economies improve their energy balances and potentially enhance intra-regional trade of natural gas and LNG.
APERC projections under the BAU show production of natural gas in the APEC region increasing 1.7% annually from 2013 to 2040. The United States, with its vast shale gas resources, increases production from 567 Mtoe in 2013 to nearly 1 000 Mtoe in 2040 to become the region’s largest producer. Although China is forecasted to see a threefold increase in gas production, domestic supply will not be sufficient to meet rising demand and imports account for nearly 40% of supply (up from 28% in 2013). South-East Asia as a whole becomes a net importer of natural gas by 2030, while individual economies begin importing sooner: Indonesia in 2026, Malaysia in 2035 and Viet Nam in 2032.
Role of natural gas in decarbonising the power sector: An Alternative Power Mix Scenario was also developed to evaluate the trade-offs among the use of gas, cleaner coal and nuclear energy to decarbonise the electricity sector. Substituting all new coal-fired capacity with natural gas (as modelled in the High Gas 100% Case) would lead to the lowest power sector emissions in 2040 (14% below the BAU). Under this case, the share of gas fired electricity generation doubles from 21% in 2013 to 42% by 2040 with Chile, Viet Nam, the Philippines and China showing the largest increases in gas based generation. Total installed gas capacity rises from 1 655 GW in BAU to 2 447 GW in the High Gas 100% Case in 2040.
For many APEC economies, however, replacing new coal plants with gas would lead to the highest generation costs and result in rising dependence on gas imports. To meet the gas demand needed under the 100% High Gas Case, gas imports to APEC would rise by 3.6 times from 235 Mtoe in BAU to 883 Mtoe in 2040. This could lead to economic competitiveness and security of supply concerns.
Conclusions: To ensure economic growth that is simultaneously cost-competitive and environmentally sustainable, APEC member economies must explore different electricity generation configurations. In alignment with their own energy and climate agendas, economies must be aware of the trade-offs involved in defining their electricity plans and the lead times for developing the necessary infrastructure. In many economies, increased use of natural gas will greatly depend on policies aimed at overcoming supply and infrastructure challenges. Economies that wish to increase the use of natural gas in electricity generation will need to expand domestic production (whenever gas resources are available) and broaden their import sources.
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Article references: APERC (Asia Pacific Energy Reserch Centre) (2016): “APEC Energy Demand and Supply Outlook 6th Edition” IEA (International Energy Agency) (2015). “World Energy Statistics 2013”
Image source: Regasification terminal in Malaysia – courtesy of APERC
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