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The Global Gas Report 2018

Snam global gas report 2018

Developed by the International Gas Union, Boston Consulting Group and Snam, this report assesses the unique role natural gas plays in the global energy mix and the opportunity it o ers to meet growing energy demand while reducing GHG emissions and improving urban air quality. Seizing this opportunity will require a concerted e ort from the natural gas industry, policymakers, and other critical stakeholders, like the civil society and the financial community.

Welcome to the World Gas Conference 2018 special edition of the Global Gas Report!

This report assesses the unique role natural gas plays in the global energy mix and the opportunity it offers to meet growing energy demand while reducing GHG emissions and improving urban air quality. Seizing this opportunity will require a concerted effort from the natural gas industry, policymakers, and other critical stakeholders, like the civil society and the financial community.

A look back over 2017 suggests that the prospects for gas are very strong in view of a combination of increased supply, availability, and growing liquidity in the LNG market. China's clean air policies contributed to strong global consumption growth of 3.7% in 2017, more than double the average growth rate of the previous five years.

However, there are specific levers that must be put to work in order for these opportunities to continue to materialize.

In this report, we highlight the key growth opportunities for gas, particularly in non- OECD Asia and Africa, and conclude that ensuring competitiveness on price, access, and the environmental sustainability of gas remain crucial for the industry. Achieving that competitiveness will require a robust and fair valuation of the costs and benefits of various energy sources, appropriate regulation to safeguard air quality and the environment and planning and decision-making based on realistic assessments.

We also invite you to consider our special feature on gas for cities, which illustrates the pivotal role gas plays in urban environments. Natural gas combines high heating intensity and efficiency with low emissions and virtually no pollution, and it can deliver energy for almost any use, from power to transport, and industry to homes. It can also do so at different scales, distributed or centralized. These qualities make it uniquely positioned to address the dual environmental challenges of localized air pollution and global climate change in urban environments. Given the continued trend towards urbanization, particularly in the developing world, this represents a key opportunity for gas demand growth. Overall, the report stresses the need for concerted e efforts and dialogue – across the gas value chain and with stakeholders. That is the reason we have chosen to present this Global Gas Report at the IGU World Gas Conference, which uniquely brings all the parties together, providing for a great opportunity to start the conversation.

We hope you find this a useful resource.

Marco Alverà - Chief Executive Officer, Snam

David C. Carrol - President, International Gas Union

Ivan Marten - BCG Vice Chairman, Energy Practice

Natural gas is in the midst of a rapid growth phase. Since 2010, average global gas consumption has grown by 1.8% per year, making it the fastest growing energy source other than renewable power. In that time, the global gas industry has gone through a significant transformation, characterized by the North America shale boom, the rapid growth of LNG, and the development of new gas markets in Asia and the Middle East. This growth is as a result of the multiple benefits offered by gas as a clean, abundant, flexible, and cost-effective fuel.

Industry forecasts widely expect the rapid growth of gas to continue. The IEA and other leading forecasters project that gas consumption will grow by at least 1.6% per year over the coming decades. Among all fossil fuels, gas is the only energy source for which consumption is projected to grow in the long-run under all key scenarios, including the most aggressive lowcarbon transition scenarios. As a result, gas is expected to overtake coal as the second leading source of energy by 2040.

Despite the positive recent developments and future outlook, gas has arguably not yet achieved the most optimistic growth projections. In particular, the share of gas in the global energy mix has remained virtually unchanged since 2010, with marginal growth only starting to be realized in 2017. This is due to challenges that gas faces in some markets based on its cost competitiveness relative to other fuel sources, accessibility of secure supply, and debates about the role that gas can play in promoting environmental sustainability.

To sustain rapid gas market growth and achieve the expectations of gas market share growth over the coming decades, three levers will be critical:

1. Cost Competitiveness: Improving the relative cost of gas to other energy sources through a combination of LNG cost efficiencies, pricing environmental externalities, and promotion of local gas production in markets around the world.

2. Security of Supply: Enabling gas supply security through the development of enhanced networks and infrastructure, more flexible commercial models, and new modular access-enabling technologies (e.g. FSRUs).

3. Sustainability: Promoting the environmental sustainability of gas as an instrument to reduce urban air pollution, by developing low carbon technologies for gas, integrating renewable gas sources into existing infrastructure, and limiting methane emissions.

Future gas growth is projected to be concentrated in several specific regions and sectors given overall primary energy demand growth, existing gas penetration, and policy. Leading regions for potential gas growth include: non-OECD Asia; the Middle East; and Africa. Meanwhile, the transport sector in North America and Global marine bunkering also offer high growth opportunities.

When considering the relative positioning of gas in these high growth potential regions and sectors, specific growth levers stand out as priorities to address:

Non-OECD Asia – power and industry sectors: Enabling secure access to gas is critical given that midstream infrastructure is limited, or unavailable, today in many markets.

Non-OECD Asia & Africa – all sectors: Enabling secure access to gas is critical given that midstream infrastructure is limited, or unavailable, today in many markets.

OECD markets – all sectors: Using gas to enable aggressive climate change emissions targets will be key, specifically through technologies to reduce emissions through gas supply chains.

A critical enabler of global gas consumption growth across these regions and sectors will be to focus on its role in cities. Gas is uniquely advantageous as a fuel source in urban areas given its limited greenhouse gas (GHG) and local pollution emissions, high heat intensity - valuable for industrial and buildings applications, and the scalability of gas infrastructure. As a result, by 2040 more than 90% of the projected global gas growth is likely to come from cities.

Growing gas consumption in cities will require diverging approaches across cities in developing countries relative to cities in developed countries. In developing countries, gas infrastructure is critical to enable secure supply, requiring an estimated $35-55 billion per year of capital investment for gas transmission, distribution, and LNG infrastructure. In developed countries, the deployment of new technologies to sustain gas consumption will be critical in light of increasing efficiency and greater electrification.

Implementing growth levers for gas globally and in cities specifically will require concerted actions from many different stakeholders. These include the development of new business models and technologies from gas industry participants, effective policies from governments, and sustained capital commitments from financial institutions. While the future of gas appears to be bright, it will require positive reinforcement.

This report assesses both recent trends in the global gas industry and the future factors that will shape it. The first section of the report evaluates how the global gas industry has developed to date and performed relative to key forecasts, while the second part considers what will be required for gas to achieve the full potential of future growth expectations. In part three, a special feature section focuses on “gas for cities”, highlighting the role that cities play in achieving gas consumption growth in the coming decades.

  • +3.7%: 2017 YOY gas consumption growth led by China (>30% of global gas growth), doubling the average growth rate of the previous 5 years
  • +60 Bcm: gas production added in 2017 by Russia, Australia & North America
  • +12%: 2017 YOY LNG trade growth, up from an average 1.6% per year from 2010-16
  • +1.6%: annual gas growth to 2040, mainly in Non-OECD Asia, Africa and Middle East
  • 90%: cities’ share of projected global gas growth by 2040, improving air quality, but requiring investments for $35-55 billion/year in gas midstream
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28 June 2018 - 10:13 CEST