CEDIGAZ, the International Association for Natural Gas, has just released its « Medium and Long Term Natural Gas Outlook 2018 ». In CEDIGAZ Reference Scenario, which incorporates national energy plans and INDC commitments, natural gas demand will grow by 1.4%/year between 2016 and 2040 and will play a growing role in the energy mix at the expense of the other fossil fuels. The gradual shift from coal and oil to natural gas and renewables helps reduce the carbon intensity of the energy system as electrification and decarbonisation accelerate over the projection period. The expansion of natural gas markets is supported by both abundant and competitive conventional and unconventional resources, as well as a very rapid growth of spot and flexible LNG trade.
Natural Gas Market - Page 7
Quarterly report on Natural gas prices (Q1 2018)
Global trends
Gas prices rose in Q1, mainly owing to a harsh winter (Fig. 1). Since then, they have declined, as is usually the case in spring and summer. The gas prices in Europe and Japan should be higher this year than last year, due to the uptrend in the oil price and its impact on Asian oil-indexed contracts and winter spot prices. For this summer, the increase in the CO2 price in Europe (+110% in one year) has created a higher reference for the gas price. These trends do not pertain to the U.S. market, where the price has tended to remain stable or fall.
Gas price, by quarter: U.K., Japan and the U.S. ($/MBtu and €/MWh)
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Spot price ($/MBtu and €/MWh)
Natural gas market fundamentals exceeded expectations in 2017
Global gas market fundamentals have trended upward in 2017. Global natural gas consumption rose by 3.3% to reach a new peak of 3640 bcm in 2017, according to CEDIGAZ First Estimates (May 2018). Macroeconomic factors (abundant natural gas supply, economic growth) contributed to this bullish trend. Regulatory and policy factors also explained this performance. Considering the average growth of 1.5%/year of the five previous years, the 2017 performance looks impressive.
The biggest story of the gas markets in 2017 was the huge growth in Chinese demand (+ 15%; + 30 bcm). This achievement mainly resulted from the ongoing intensification of environmental policy, enhancing coal-to-gas switching. The Middle East and Africa both also posted strong increases, at 4.8% and 6.7% respectively, aided by improving infrastructure, incremental CCGT generating capacity and availability of gas (Iran, Egypt…). In Europe (Turkey included), natural gas consumption was up 4.8%, helped by both the competitiveness of gas relative to coal and the weakness in nuclear and hydro energy. In the CIS, natural gas consumption returned to growth in Russia, driven by heating and the resumption of industrial activity. In the opposite direction, consumption was sluggish in North America (United States) and South & Central America. In the United States, gas consumption posted an unusual drop in 2017 (- 1.4%), following seven years of strong growth, amid higher natural gas prices. Natural gas consumption in the power sector fell by more than 7% as the strong expansion of renewables affected gas position in the power merit order.