The 2014 edition of CEDIGAZ’s flagship survey Natural Gas in the World highlights some disturbing signs of weakness on the demand and supply sides, indicating structural challenges that will need to be addressed before a golden age of gas can occur.
In 2013, growth in worldwide gas demand decelerated, up by only 1% versus 2.4% in 2012. This is less than the 3% growth achieved by coal and, most remarkably, less than that of oil (1.4%). Moreover, gas was the only fossil fuel to record lower growth in 2013 than in 2012. This phenomenon may be observed even in Asia – a powerhouse in terms of growth in gas demand – where demand rose 4% in 2013, down from 6% one year earlier. Gas demand had already shown its limitations in 2012, when it gained only 2.4%, compared to an average growth of 2.8% per year in the previous decade.
Japan’s energy policy is undergoing fundamental changes. The accident at TEPCO’s Fukushima Daiichi nuclear power plant questions the future contribution of nuclear power in the national energy mix. Growing imports of fossil fuels to replace the lost nuclear capacity inflated energy prices and raise economic and energy security challenges. At the same time, the US shale gas and oil revolution is reshaping the global energy scene. Japan expects to take advantage of the trend to eliminate the “Asian premium” on natural gas prices and expand cheaper natural gas consumption. These developments have driven the Government of Japan to review its energy policy from scratch and adopt a new Strategic Energy Plan. This new policy has far reaching implications for gas and coal development in Japan but also for the international markets as Japan is the world’s largest LNG importer and the second largest coal importer.
The NBP price stood at €21.8/MWh ($8.1/MBtu) in October, an increase of 4.5% in one month. However, it stayed at a level that continues to be moderate, 17% lower than the price a year ago. The market remains relatively volatile (-5% to +4% compared to the average) influenced by factors such as the temperature, fluctuations in Norwegian deliveries and declarations related to the Russo-Ukrainian negotiations. For instance, on October 17 (+1.6%), the Russian president warned Europe about big transit risks for gas this winter, just before the October 21 negotiations with Ukraine (still ongoing on the 29th). For now, the market is not anticipating a crisis. The projected winter price remains moderate, between €23.5 and 25.5/MWh ($8.7 and 9.4/MBtu) compared to €26/MWh ($10.3/MBtu) last winter. Actual trends will depend in particular on temperature (currently moderate) and deliveries from Russia. The range of “possibles” remains fairly broad, with Asian LNG providing a potential ceiling for the NBP price in the event of a crisis.