The future path of natural gas
A glimpse at the key drivers of gas consumption growth in the light of 2016 data, focusing on continuing barriers and initiatives aimed to overcome them
For further information, you can download the pdf version of the report that features a more detailed analysis and further tables and graphs.
Cost competitiveness vs. other fuels
The Cost competitiveness of gas in relation to coal is improving generally due to wider availability and lower cost of LNG spot cargos, but a gap remains in Europe and in Asia. The evolution of gas prices relative to coal will be particularly important in Asia where LNG is the most expensive globally and where more than 40% of additional gas demand to 2030 is forecast to come from.
To be competitive with coal, a simple levelized cost of electricity analysis suggests gas would need to land consistently in Asia at around $4 to $8 per MMBtu depending on the season potentially at the lower end of the scale for some countries. With new brownfield capacity additions in the US plus some other markets, spot volumes of LNG are now starting to price in this range. However, this is potentially below capital cost recovery for some of the new major projects, especially in Australia.
The sustainability of these prices therefore depends on the evolution of the costs of the LNG supply chain, and in particular liquefaction costs.
The price of carbon will also be a critical factor for determining the competitiveness of gas with relation to coal for power generation and oil in the transport sector. This is a strongly debated issue in Europe at the moment. Analysis widely suggests a global carbon price of at least $20/t will be essential to at least enable competition for gas vs. coal.
Availability and supply security
LNG infrastructure and trade had a great expansion in 2016: global trade in natural gas grew by more than 6% and this growth made possible overall improvements to supply security and availability, but a key remaining challenge is the rigidity of current LNG contracting and supply structures. New technologies for more flexible LNG supply and re-gasification and investments in gas supply infrastructure and gas storage infrastructure are required:
- the use of FSRU capacity is growing rapidly, nearly doubling from 2013-16;
Global FSRU capacity
- for LNG supply, floating liquefaction (FLNG) is emerging as a means of accessing remote and stranded assets;
- for in-land production, small Scale LNG (SSLNG), have also been developed to support off-grid uses.
Small scale LNG
In both the near term and long term, the challenge of climate change necessitates that greenhouse gas emissions are reduced throughout the gas value chain. In the near term as gas scales up, a major challenge is limiting fugitive emissions of methane. In the longer term though, the imperative will be to transition the full gas value chain towards near zero emissions.
02 October 2017 - 11:25 CEST