Natural gas grows strongly, supported by broad-based demand, plentiful low-cost supplies, and the increasing availability of gas globally, aided by the growing supplies of liquefied natural gas (LNG).
In the ET scenario, natural gas grows at an average rate of 1.7% p.a. - increasing nearly 50% by 2040 - the only source of energy, along with renewables, whose share in primary energy increases over the Outlook.
Growth in gas demand is widespread, increasing in almost every country and region considered in the Outlook. The increase is driven in broadly equal amounts by use in power and industry. Transport records the fastest growth, albeit with small volumes.
Global gas production is led by the US and Middle East (Qatar and Iran) – who together account for almost 50% of the growth in gas production over the Outlook – supported by strong increases in output in both China and Russia.
The importance of gas trade continues to grow over the Outlook, driven by robust expansion of LNG supplies which account for more than 15% of total gas demand in 2040, overtaking inter-regional pipeline shipments in the late 2020s.
Growth in natural gas demand is led by industry and the power sector.
In the ET scenario, the use of gas in industry accelerates over the Outlook, while the growth of gas in the power sector slows.
The increased industrial demand for gas over the Outlook is largely driven by developing economies as they continue to industrialize, especially in regions with large gas resources (Middle East, Africa). Coal-to-gas switching, especially in China, also supports gas demand in industry.
The additional gas absorbed by the power sector is driven by the overall growth of power demand, with the share of natural gas in the global power sector remaining relatively stable at around 20%. Among the major gas producers, only North America experiences an increase in the share of gas at the expense of coal.
Although the use of gas within transport grows rapidly, it remains small relative to industry and power.
The speed and pattern of growth in gas demand, particularly in the non-OECD, is dependent on the pace at which the required supporting infrastructure is built: this is a key source of uncertainty concerning the Outlook for natural gas.
Global LNG volumes are set to expand substantially, leading to a more competitive, globally integrated gas market.
In the ET scenario, LNG trade more than doubles, reaching almost 900 Bcm in 2040 up from around 400 Bcm in 2017.
The increase in LNG exports is led by North America, followed by the Middle East, Africa and Russia. As the LNG market matures, the US and Qatar emerge as the main centres of LNG exports, accounting for around 40% of all LNG exports by 2040.
Asia remains the dominant market for LNG imports, although the pattern of imports within Asia shifts, with China, India and Other Asia overtaking the more established markets of Japan and Korea, and accounting for around half of all LNG imports by 2040.
Europe remains a key market, both as a ‘balancing market’ for LNG supplies and a key hub of gas-on-gas competition between LNG and pipeline gas.
The precise profile of LNG volume growth will depend on the timing and availability of the new investments needed to finance the considerable expansion. The cyclical nature of LNG investments means there is a risk that the development of the LNG market will continue to be associated with periods of volatility.
In the ET scenario, European gas production declines by 40%, causing Europe’s import dependency to increase to around three-quarters in 2040.
Europe’s existing infrastructure means it has the capacity to increase substantially its imports of either LNG or pipeline gas, especially from Russia.
The greater ease of transportation means pipeline gas has a marked cost advantage over LNG; the main constraint on pipeline imports is concerns about Europe’s dependency on Russia for gas. In the ET scenario, the development of a globally integrated gas market eases these concerns, allowing Russia to increase slightly its share of European gas demand.
In China, despite sizeable increases in domestic production, demand growth outstrips supply, causing import dependency to rise to over 40% by 2040. Around half of these additional imports are met by incremental pipeline capacity from Russia and other CIS countries, and the remainder from LNG.
As in Europe, as well as pure cost considerations, China’s choice of gas supply may also depend on the energy security implications of different sources of supply (some of these energy security issues are explored in the ‘Less globalization’ scenario).