(EnergyAsia, June 16 2014,  Monday) — Following the boom in North America, the natural gas industry will experience a “golden age” of demand and supply growth in China over the next five years to 2019, predicts the International Energy Agency (IEA).

In its latest Medium-Term Gas Market Report, the Paris-based agency said Chinese natural gas demand will rise by 90% to 315 billion cubic metres (bcm) with more than half of that to be met by a 65% rise in domestic production to 193 bcm in 2019. As in North America, China will also experience an unconventional gas production boom.

China is desperately pushing the use and production of natural gas as the government is under pressure to improve air quality in most of its cities and reduce the use of coal.

The power, industrial and transport sectors will drive Chinese gas demand which will be a major reason for raising annual global demand growth by 2.2% over the forecast period. Still, Chinese demand growth will not be sufficiently strong to offset the projected slowdown in the rest of the world. The IEA had forecast global gas demand to grow by 2.4% per year in the 2013 report.

Liquefied natural gas (LNG) will meet much of the world’s demand, with new pipelines also playing a role. In a shift away from the traditional dominance of state-owned suppliers, private-sector operators in Australia, Canada and the US are taking the lead in the expansion of the LNG trade, which is expected to grow by 40% to reach 450 bcm by 2019. Half of all new LNG exports will originate from Australia, while North America will account for around 8% of the global LNG trade by 2019, said the IEA.

“We are entering the age of much more efficient natural gas markets, with additional benefits for energy security,” said IEA executive director Maria van der Hoeven last week.
“While demand growth is driven by the Asia-Pacific region – and especially China – supply growth for the international gas trade is dominated by private investments in LNG in Australia and North America.”

The spectre of high prices, Europe and the Middle East
High prices and the weak outlook in Europe and the Middle East will be the dark clouds to potentially mar the dawning of gas’s golden age, said Ms van der Hoeven.

“High LNG prices are threatening to crimp demand as many countries are increasingly unwilling, or unable, to afford these supplies – and that could open the door to coal,” she said.

“Looking ahead, unless we see timely investment in new production and LNG facilities and the reversal of the recent cost inflation of LNG, only a very strong climate policy commitment could redirect Asia’s coal investment wave to gas.”

The IEA report also paints a weak picture of Europe.

“Due to low power demand growth and robust policy support for renewable energy, European gas consumption will not recover to its 2010 peak over the next five years. Moreover, there will be no meaningful diversification of European gas supplies through the end of the decade,” said the IEA.

The report said that despite abundant geological resources, the Middle East will struggle to achieve its full production potential – with some countries even experiencing gas shortages. The main reason for this is unrealistically low regulated gas prices that hinder upstream investment and encourage wasteful consumption.

Gas demand growth to fall behind oil and coal

For all the talk of a golden age, global gas demand grew at a slower rate than the other two fossil fuels last year. According to the IEA, natural gas use edged up by 1.2% to 3.49 trillion cubic metres compared with oil demand’s 1.4% growth and coal’s by more than 3%.