Chapter 3 - Natural Gas
In the IEO2008 reference case, natural gas consumption in the non-OECD
countries grows more than twice as fast as in the OECD countries. Production
increases in the non-OECD region account for more than 90 percent of the
growth in world production from 2005 to 2030. |
Worldwide, total natural gas consumption increases from 104 trillion cubic
feet in 2005 to 158 trillion cubic feet in 2030 in the IEO2008 reference
case (Figure 35). World oil prices are expected to remain high, and as
a result natural gas replaces oil wherever possible. In addition, because
natural gas produces less carbon dioxide when it is burned than does either
coal or petroleum, governments implementing national or regional plans
to reduce greenhouse gas emissions may encourage its use to displace other
fossil fuels.
Natural gas remains a key energy source for industrial sector uses and
electricity generation throughout the projection. The industrial sector,
which is the worlds largest consumer of natural gas, accounts for 43 percent
of projected natural gas use in 2030. In the electric power sector, natural
gas is an attractive choice for new generating plants because of its relative
fuel efficiency and low carbon dioxide intensity. Electricity generation
accounts for 35 percent of the worlds total natural gas consumption in
2030.
In 2005, OECD member countries and non-OECD countries each consumed 52
trillion cubic feet of natural gas. Preliminary data for 2006 indicate
that natural gas consumption in non-OECD countries has surpassed that in
OECD countries. In the IEO2008 reference case, natural gas consumption
in the non-OECD countries grows more than twice as fast as consumption
in the OECD countries, with 2.3-percent average annual growth from 2005
to 2030 for non-OECD countries, compared with an average of 1.0 percent
for the OECD countries. Natural gas demand in the non-OECD countries accounts
for 74 percent of the total world increment in natural gas consumption
over the projection period. Natural gas use in the non-OECD countries increases
from 50 percent of the world total in 2005 to 58 percent in 2030.
The OECD countries accounted for 38 percent of the worlds total natural
gas production and 50 percent of natural gas consumption in 2005; in 2030,
they account for 27 percent of production and 42 percent of consumption.
As a result, the OECD countries are projected to rely increasingly on imports
to meet natural gas demand, with a growing percentage of natural gas imports
coming in the form of liquefied natural gas (LNG). In 2030, more than one-third
of the natural gas consumed in OECD countries is projected to come from
non-OECD sources, up from one-quarter in 2005.
World Natural Gas Demand
OECD Countries
Natural gas consumption in OECD North America is projected to increase
at an average annual rate of 0.6 percent from 2005 to 2030 (Figure 36).
For the United States the average annual increase is 0.1 percent, significantly
lower than for Canada and Mexico, largely because higher natural gas prices
in the U.S. market are expected to dampen the use of natural gas for electricity
generation. As North Americas largest user of natural gas, the United
States accounted for 81 percent of the 27.4 trillion cubic feet consumed
in North America in 2005. In 2030 the U.S. share falls to 72 percent, reflecting
relatively slow growth in U.S. demand and robust growth in Canada and Mexico.
In 2005, natural-gas-fired plants accounted for 19 percent of net electricity
generation in the United States and coal-fired plants 50 percent. The natural
gas share is projected to rise to 21 percent in 2010, after which higher
natural gas prices discourage the construction of new natural-gas-fired
plants. U.S. natural gas consumption for electricity generation increases
in the near term, from 5.9 trillion cubic feet in 2005 to 6.6 trillion
cubic feet in 2015, then declines steadily to 5.0 trillion cubic feet in
2030. As more coal-fired plants are built after 2010, the natural gas share
of generation falls to 14 percent and the coal share rises to 54 percent
in 2030. Nuclear and renewables also gain market share at the expense of
natural gas.
Canadas total natural gas consumption is projected to increase steadily,
at a rate of 1.5 percent per year, from 3.4 trillion cubic feet in 2005
to 5.0 trillion cubic feet in 2030. In contrast to the decline in natural
gas consumption for electricity generation in the United States, in Canada
it increases by one-third from 2005 to 2030, growing at an average annual
rate of 1.5 percent. Even more rapid growth is projected for Canadas industrial
natural gas consumption, averaging 2.0 percent per year, and including
vast quantities of natural gas consumed in the mining of the countrys
oil sands deposits.
By volume, the total increase in Canadas industrial use of natural gas
from 2005 to 2030 equals 1.2 trillion cubic feet, compared with an increase
of 0.2 trillion cubic feet for electricity generation. The growth in domestic
consumption, coupled with a projected decline in Canadas natural gas production,
leaves less Canadian natural gas available for export. Canada is projected
to consume 93 percent of its own production in 2030, compared with 52 percent
in 2005.
In Mexico, strong growth in natural gas consumption is expected in all
sectors, with total consumption more than doubling from 2005 to 2030. Industrial
natural gas consumption nearly doubles, and consumption for electricity
generation nearly triples over the projection period. Consumption in the
residential and commercial sectors also expands strongly (by 3.6 percent
per year), although the absolute quantities are small.
Because the expected growth in Mexicos natural gas consumption over the
period (an increase of 2.3 trillion cubic feet in 2030 compared with 2005)
far exceeds its production growth, its dependence on pipeline imports from
the United States and imports of LNG from overseas increases. Imports from
the United States are offset somewhat by exports of regasified LNG to the
United States, from a new facility in Baja California that is scheduled
to begin operation in 2008; however, Mexico remains a net importer of U.S.
natural gas throughout the projection.
In OECD Europe, natural gas consumption is projected to grow by an average
of 1.4 percent per yearfrom 19.3 trillion cubic feet in 2005 to 22.8 trillion
cubic feet in 2015 and 27.2 trillion cubic feet in 2030 (Figure 37)mostly
as a result of increasing use for power generation. Many of the OECD Europe
nations have made commitments to reduce carbon dioxide emissions, bolstering
the incentive for governments to encourage the use of natural gas in place
of other fossil fuels. With renewable energy sources projected to remain
more expensive than natural gas in OECD Europe, natural gas is expected
to be the fuel of choice for new generating capacity. Natural-gas-fired
generation in the region increases by 3.9 percent per year in the IEO2008 reference case, from 0.7 trillion kilowatthours in 2005 to 1.2 trillion
kilowatthours in 2015 and then to 1.9 trillion kilowatthours in 2030.
Natural gas consumption in Japan and South Korea is projected to grow on
average by 0.7 percent and 2.2 percent per year, respectively, over the
projection period, with each country adding less than 1 trillion cubic
feet of
gas consumption between 2005 and 2030 (Figure 38). Recent growth in natural
gas consumption in both countries has been strong, with outages at nuclear
power plants in Japan compounding the increase. LNG imports into Japan
for 2007 reportedly totaled 3.1 trillion cubic feet of natural gas (66.8
million tons of LNG), up by 7.6 percent from 2006. The current nuclear
issues are expected to be resolved before 2010, however [1], and continued
growth in nuclear output, along with a modest GDP growth rate, is expected
to slow the growth of Japans natural gas consumption over the longer term.
In Australia and New Zealand, the industrial sector currently is the predominant
consumer of natural gas and is projected to account for more than 50 percent
of all natural gas consumption in the region throughout the projection
period. Natural gas is the fastest growing fuel in Australia and New Zealand
in the IEO2008 reference case, accounting for just over 30 percent of the
projected growth in the regions total energy consumption from 2005 to
2030. It is also the fastest growing fuel in the regions electric power
sector. Australias ratification of the Kyoto Protocol treaty in March
2008 is likely to increase the countrys use of natural gas to displace
more carbon-dioxide-intensive coal. In addition, several policies have
been enacted by state governments in Australia to stimulate the use of
natural gas for electric power generation and moderate the anticipated
growth of generation using coal, of which Australia has large reserves.
Non-OECD Countries
In total, the countries of non-OECD Europe and Eurasia rely on natural
gas for 51 percent of their energy needs a larger share than for any other
country grouping in the IEO2008 projections. Russia is second only to the
United States in total natural gas consumption, with demand totaling 16.2
trillion cubic feet in 2005 and representing 55 percent of Russias total
energy consumption (Figure 39). The other countries of non-OECD Europe
and Eurasia met 46 percent of their combined total energy needs with natural
gas in 2005, consuming 9.1 trillion cubic feet. With ample natural gas
resources, non-OECD Europe and Eurasia is expected to continue its reliance
on natural gas in the future.
Natural gas consumption in non-OECD Europe and Eurasia grows at an average
annual rate of 1.1 percent over the projection period, almost maintaining
its share in the overall energy mix (although the growth rates for consumption
of liquids and nuclear energy are slightly higher). The increase in natural
gas consumption accounts for 45 percent of the total increase in energy
consumption in non-OECD Europe and Eurasia from 2005 to 2030.
Non-OECD Asia, which accounted for only 9.0 percent of the worlds total
consumption of natural gas in 2005, shows the most rapid growth in natural
gas use in the reference case and accounts for 33 percent of the total
increase in world natural gas consumption from 2005 to 2030. Natural gas
consumption in non-OECD Asia nearly triples, from 9.3 trillion cubic feet
in 2005 to 27.4 trillion cubic feet in 2030, expanding by 4.4 percent per
year on average over the projection period (Figure 40).
In both China and India, natural gas is currently a minor fuel in the overall
energy mix, representing only 3 percent and 8 percent, respectively, of
total primary energy consumption in 2005. In the IEO2008 reference case,
both countries natural gas consumption rises rapidly, growing by 5.5 percent
per year in China and 4.6 percent per year in India on average from 2005 to 2030, as LNG imports and new domestic
production help the two countries meet continued demand growth.
Natural gas consumption grows at average annual rates of 1.9 percent in
the Middle East and 3.5 percent in Africa from 2005 to 2030 (Figure 41).
Algeria, Nigeria, Egypt, and Libya, the major African producers, are also
the major consumers, as there is very little infrastructure on the continent
for intraregional trade of natural gas. The two notable exceptions are
the Mozambique-South Africa pipeline, with a capacity of 0.1 trillion cubic
feet per year, and the West African Gas Pipeline project of similar capacity.
South Africa has been importing natural gas from its neighbor to feed the
industrial complex at Sasolburg since completion of the pipeline from Mozambique
in 2004. The West Africa pipeline, still under construction, is expected
to bring natural gas from Nigeria to consumers in Benin, Ghana, and Ivory
Coast.
In Central and South America, natural gas is the second-fastest-growing
energy source after nuclear power (although nuclear generation is growing
from a very small base and remains only a minor part of the regions total
energy consumption). Natural gas demand increases on average by 2.8 percent
per year, from 4.4 trillion cubic feet in 2005 to 8.7 trillion cubic feet
in 2030. For Brazil, the regions largest economy, natural gas consumption
nearly triplesfrom 0.7 trillion cubic feet in 2005 to 1.8 trillion cubic
feet in 2030.
World Natural Gas Supply
The non-OECD nations are projected to account for 90 percent of the worlds
total increase in natural gas production from 2005 to 2030. Non-OECD natural
gas production grows by an average 2.5 percent per year in the reference
case, from 63 trillion cubic feet in 2005 to 116 trillion cubic feet in
2030 (Table 5). Over the same period, production in the OECD countries
grows by only 0.3 percent per year, from 39 trillion cubic feet to 42 trillion
cubic feet.
A significant portion of non-OECD natural gas production (excluding Russia
and the other nations of Eurasia) is expected to be for export projects.
The Middle East and Africa are at the forefront of the trend to develop
export projectsparticularly, LNG exports. For the two regions combined,
natural gas production increases by 21.0 trillion cubic feet from 2005
to 2030, while their combined demand for natural gas increases by only
9.9 trillion cubic feet. LNG projects are expected to account for a significant
portion of natural gas exports from the Middle East and Africa. In Qatar,
for instance, export facilities with a total capacity of approximately
3.6 trillion cubic feet of natural gas (77 million metric tons of LNG)
are expected to be in operation by 2015, as compared with the countrys
2005 LNG exports of 1 trillion cubic feet. The increase in exports from
Qatar alone would account for 14 percent of the total projected increase
in production from 2005 to 2015 for the non-OECD countries, excluding non-OECD
Europe and Eurasia.
Significant increases in natural gas production are also projected for
the countries of non-OECD Asia, but those supply increases are expected
to be used largely for consumption in non-OECD Asia. China and India are
projected to almost double their production volumes from 2005 to 2015,
bringing production from Indias Krishna Godavari Basin and Chinas Sichuan
province, as well as from smaller projects, to market. Some new export
projects are expected to be brought on line in non-OECD Asia by 2015most
notably, the Tangguh LNG project in Indonesiabut production increases
are aimed primarily at meeting rapid demand growth in the region. In 2005,
net exports accounted for 17 percent of total production in non-OECD Asia,
down from 30 percent in 1995. As rapid increases in production continue
to be outpaced by consumption growth, non-OECD Asia is projected to become
a net importer of natural gas after 2015.
In non-OECD Europe and Eurasia, natural gas production is projected to
grow from 29.3 trillion cubic feet in 2005 to 36.1 trillion cubic feet
in 2015 and 43.0 trillion cubic feet in 2030, although pricing and payment
disputes currently are continuing to affect supplies. In March 2008, Russias
Gazprom reduced supplies of natural gas to Ukraine in a dispute over payment
for deliveries [2]. The reduction lasted for only 3 days, however, and
did not affect supplies to downstream customers in OECD Europe. Production
increases are projected to outpace growth in natural gas demand in non-OECD
Europe and Eurasia, and the IEO2008 reference case anticipates that Eurasian
producers will remain important suppliers for their neighbors, especially
in OECD Europe.
The expansion of natural gas trade between Eurasia and its western neighbors
has not evolved without some difficulties. Exports of natural gas from
Azerbaijan began to flow through the new South Caucasus pipeline to Georgia
in March 2007 and to Turkey in July 2007 [3]. Turkey then began re-exporting
Azeri gas to Greece after a new pipeline connecting Turkey and Greece opened
in November 2007. In January 2008, Turkmenistan cut natural gas exports
to Iran. Turkmenistan cited technical issues on the pipeline, later saying
that Irans failure to keep current on payments was hindering pipeline
repairs [4]. The real reason for the halt in supplies, however, was widely
believed to be a pricing dispute. Turkmenistan had proposed doubling the
price Iran paid for imports, from $1.91 per million Btu ($70 per thousand
cubic meters) to $3.83 per million Btu, and Iran reacted by cutting exports
to Turkey to make up for the lost imports from Turkmenistan. In turn, Turkey
then cut re-exports of Azeri gas to Greece to make up for the lost imports
from Iran. Subsequently, Russias Gazprom increased its exports of natural
gas to Turkey, diffusing the situation [5].
Brazil has the fastest-growing natural gas production in the IEO2008 reference
case, with average annual increases of 5.2 percent from 2005 to 2030; however,
it starts from a very low level of 0.3 trillion cubic feet in 2005. As
a whole, Central and South Americas production increases by 2.7 percent
per year, from 4.9 trillion cubic feet in 2005 to 9.5 trillion cubic feet
in 2030. Despite adequate reserves that support healthy prospects for long-term
production growth in South America, the region has begun importing LNG
to supplement current domestic supplies, which have failed to keep up with
demand (especially, peak seasonal demand). Argentina became the first country
in South America to import LNG, receiving its first cargo in May 2008.
Brazil and Chile are expected to follow: the arrival of Brazils first
LNG cargo is planned for late 2008, and Chiles first LNG import facility
is expected to begin operating in 2009.
In the OECD, Australia/New Zealand is projected to have the strongest growth
in natural gas production. Much of the growth in Australias production
is expected to support planned or proposed LNG export projects, however,
and increasing costs for liquefaction projects have delayed project commitments
in Australia and around the world. New projects in Western Australia face
further hurdles. The first is a government policy requiring new export
projects to reserve 15 percent of production for domestic use. The second
is the intention of the state and federal governments to identify a single
hub for liquefaction facilities serving the Browse Basin, in order to minimize
environmental impacts from the separate facilities being proposed by various
companies.
In contrast, development of coalbed methane (CBM) reserves in Queensland
and News South Wales is progressing rapidly, with production from fiscal
year 2000-20019 to 2005-2006 growing by 30 percent per year on average
[6] and accounting for roughly 5 percent of production and 8 percent of
consumption in 2005 and 2006. Production from CBM represents a higher percentage
of total natural gas consumption than total production, because no CBM
is being exported currently. That may change, however, as four LNG projects
have been proposed with CBM as the feed gas [7].
In OECD North America, the United States has historically been both the
largest producer and the largest consumer of natural gas, and Canada has
been the primary source of U.S. natural gas imports. In 2005, Canada provided
86 percent of gross U.S. imports of natural gas. Although Canadas unconventional
production is expected to increase over the projection period and LNG imports
into Canada are projected to begin by the end of the decade, the combined
increases in supply are not sufficient to offset a decline in conventional
production in Canadas largest producing basin, the Western Canadian Sedimentary
Basin. Increasing costs are expected to prevent the development of Canadas
McKenzie Delta natural gas resource in the reference case, and Canadas
production is projected to decline steadily, at an average annual rate
of 0.8 percent. U.S. gross imports of LNG are projected to exceed gross
pipeline imports from Canada after 2017, and Canadas share of U.S. gross
imports is projected to decline to 32 percent in 2030.
In the United States, rising natural gas prices are expected to provide
sufficient incentive for an Alaska natural gas pipeline, which has long
been in the planning stages, to come on line. The pipeline is expected
to begin transporting natural gas from Alaska to the lower 48 States in
2020, making a significant contribution to U.S. domestic supply. Alaskas
natural gas production is expected to account for 100 percent of the projected
growth in domestic U.S. conventional natural gas production.
A large portion of North Americas remaining technically recoverable natural
gas resource base consists of unconventional sources, which include tight
sands, shale, and coalbed methane. With most of the large onshore conventional
fields in the United States already having been discovered, the United
States, like Canada, must look to these costlier sources of supply to make
up for declines in conventional production. Unconventional production is
expected to be a significant source of U.S. incremental supply, increasing
from 7.9 trillion cubic feet (44 percent of total domestic production)
in 2005 to 9.5 trillion cubic feet (49 percent) in 2030. With the increases
in unconventional production and production from Alaska more than offsetting
the decline in conventional production, U.S. production grows by an average
of 0.2 percent per year.
The largest source of incremental natural gas supply for the United States
is expected to be LNG imports, which increase from 0.6 trillion cubic feet
in 2005 to 2.8 trillion cubic feet in 2030. As of January 2008, five U.S.
LNG import facilities were in operation, with a total peak capacity of
slightly more than 5.8 billion cubic feet per day. Four additional facilities
are under construction in the Gulf of Mexico and two in the offshore waters
of New England. When completed, the new terminals will more than double
U.S. LNG import capacity.
U.S. gross imports of LNG are expected to grow rapidly through 2015, increasing
from 631 billion cubic feet in 2005 to 2.1 trillion cubic feet in 2015,
as new domestic regasification capacity comes on line and new liquefaction
projects are completed worldwide. The growth in LNG imports slows after
2015, however, as natural gas prices in general rise and demand declines.
In the reference case projection, LNG imports reach 2.8 trillion cubic
feet in 2030 (Figure 42). The emerging LNG markets in Canada and Mexico
also show their strongest growth in the early years of the forecast.
There are significant untapped reserves of natural gas in Mexico; however,
the state-owned oil company, PEMEX, does not have the resources needed
to develop them fully, and the constitutional provision that prohibits
foreign ownership of Mexicos oil and natural gas resources makes it difficult
to attract foreign direct investment in the countrys energy sector. Still,
Mexicos natural gas production is expected to increase significantly,
from 1.5 trillion cubic feet in 2005 to 2.7 trillion cubic feet in 2030.
Reserves and Resources
Historically, world natural gas reserves have generally trended upward
(Figure 43). As of January 1, 2008, proved world natural gas reserves,
as reported by Oil & Gas Journal,10 were estimated at 6,186 trillion cubic
feet virtually unchanged from the estimate for 2007 of 6,168 trillion
cubic feet [8]. Reserves have remained relatively flat since 2004, despite
growing demand for natural gas, implying that, thus far, producers have
been able to continue replenishing reserves successfully with new resources
over time.
The largest additions to natural gas reserve estimates in 2008 were reported
for Venezuela and Saudi Arabia. Venezuela added an estimated 14 trillion
cubic feet (a 9-percent increase over 2007 proved reserves) and Saudi Arabia
13 trillion cubic feet (5 percent). There were smaller, but still substantial,
reported increases in reserves in Malaysia and Angolaboth of which added
around 8 trillion cubic feet. The reserve addition in Malaysia represents
an 11-percent increase in its proved reserves. The addition in Angola represents
an increase of more than 300 percent. The United States also had a fairly
substantial 6-percent increase in reserves, almost 7 trillion cubic feet
over the 2007 estimate.
The largest reported declines in natural gas reserves were reported for
Iran (a decrease of 26 trillion cubic feet) and Qatar (5 trillion cubic
feet); however, given the vast reserves in each of those countries, the
declines represent relatively modest decreases of 3 percent and 1 percent,
respectively. A more significant drop in reserves was reported for Papua
New Guineajust over 4 trillion cubic feet, or a 34-percent decrease in
the countrys total natural gas reserves. Other decreases in proved natural
gas reserves were reported for Indonesia (4 trillion cubic feet), Norway,
Thailand, Algeria, and Libya (about 3 trillion cubic feet each).
Almost three-quarters of the worlds natural gas reserves are located in
the Middle East and Eurasia (Figure 44). Russia, Iran, and Qatar together
accounted for about 57 percent of the worlds natural gas reserves as of
January 1, 2008 (Table 6).
Despite high rates of increase in natural gas consumption, particularly
over the past decade, most regional reserves-to-production ratios are substantial.
Worldwide, the reserves-to-production ratio is estimated at 63 years [9].
By region, the highest ratios are about 48 years for Central and South America,
78 years for Russia, 79 years for Africa, and more than 100 years for the
Middle East.
The U.S. Geological Survey (USGS) periodically assesses the long-term production
potential of worldwide petroleum resources (oil, natural gas, and natural
gas liquids). According to the most recent USGS estimates, released in
the World Petroleum Assessment 2000 and adjusted to reflect current proved
reserves, a significant volume of natural gas remains to be discovered.
Worldwide undiscovered natural gas is estimated at 4,133 trillion cubic
feet (Figure 45). Of the new natural gas resources expected to be added
through 2025, reserve growth accounts for 2,347 trillion cubic feet.
Notes and Sources
References
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