IEA details shifting global gas market

US supply and Chinese demand will continue to dominate developments in natural gas markets through 2024, but a wave of planned supply additions and tight transport and storage infrastructure could disrupt existing trade dynamics, an IEA official said today.

The US by 2024 will surpass Australia and Qatar as the world's leading exporter of liquefied natural gas (LNG), the Paris-based IEA said in its Gas 2019 report released on 7 June. China will account for 60pc of projected global demand growth over the coming five years.

And the underlying relationship between the two markets may evolve and grow more complex in the intervening years, IEA's head of gas, power and coal Peter Fraser told participants at a forum hosted by Columbia University's Center on Global Energy Policy in New York.

Growing domestic production in China and imports via pipeline may dislodge some LNG imports, as both suppliers and producers across Asia-Pacific contend with ongoing shortfalls in gas storage and with vessel and transport availability tightness, center analyst Akos Losz said.

Chinese policy that has supported substituting gas for coal will drive LNG import demand in the near future, but the effect of that policy on demand growth will begin to fade, and other markets, including India, could take a more dominant position.

Regulated consumer prices for gas has kept demand robust in a number of Asia-Pacific markets, but suppliers will require prices closer to global market levels to meet that demand with imported LNG supply, Fraser said.

"Market prices are converging as global LNG trade expands, and the share of market-driven pricing is expanding in all regions," Fraser said. "Pricing reforms do have to continue if we are going to see a sustainable gas market."

"The influence of market pricing on end users' prices remains currently limited for most Asian markets," he said.

Strong demand has underpinned a wave of final investment decision (FID) approvals for new LNG export capacity in 2019, the IEA's report showed. Projects representing more than 120bn m³/yr (11.6 Bcf/d) of gas-equivalent capacity are expected to receive final approval this year, including projects in the US, Russia, Qatar and Mozambique.

Much of that capacity is being proposed without underlying contracts or offtake agreements and could represent as much as three times the projected medium-term demand, Losz said. The IEA currently forecasts the US will hit 1 trillion cubic meters/yr of total gas production by 2024, although Fraser said the IEA has not forecast significant impacts on benchmark Henry Hub natural gas pricing even as supply grows.

"Many projects taking FID are seeing demand growth we're not seeing," Fraser said. The prospect of ongoing boom-bust cycles in the LNG export market has driven some suppliers to seek out customers in smaller markets, including in the Caribbean and southern Europe, GasVista president Leslie Palti-Guzman said.