Natural gas

Natural gas consumption

Natural gas followed far greater resilience than coal, but gas consumption decreased by 2.3% or 81 ‎billion cubic metres (bcm), similar to the fall seen in 2009 during the financial crisis. Gas consumption ‎fell in most regions – in North America and Europe by 2.6% and 2.5% respectively. Notable exceptions ‎to this trend were China, where demand grew by 6.9% and Iran.‎

Despite the reduction in absolute levels of gas demand, the share of gas in primary energy continued ‎to rise (due to the overall fall in primary energy demand), reaching a record high of 24.7%.‎

In the power sector, low gas prices helped gas-fired power generation gain share in the US and hold ‎its own in Europe.‎

Natural gas production

Gas production fell by 123 bcm (-3.3%), with the largest drops seen in Russia (-41 bcm) and the US (-‎‎15 bcm).

Natural gas reserves

World proved gas reserves decreased by 2.2 Tcm to 188.1 Tcm in 2020. A revision to Algeria (-2.1 ‎Tcm) provided the largest decrease, partially offset by a 0.4 Tcm increase in Canadian reserves. ‎Russia (37 Tcm), Iran (32 Tcm) and Qatar (25 Tcm) are the countries with the largest reserves.

The ‎current global R/P ratio shows that gas reserves in 2020 accounted for 48.8 years of current  ‎production. The Middle East (110.4 years) and CIS (70.5 years) are the regions with the highest R/P ‎ratio.‎

Natural gas trade 

Inter-regional gas trade reduced by 5.3%, completely accounted for by a 54 bcm (10.9%) drop in ‎pipeline trade.‎

LNG supply grew by 4 bcm or 0.6%, well below the 10-year average rate of 6.8% p.a. US LNG supply ‎expanded by 14 bcm (29%), but this was partially offset by declines in most other regions, notably ‎Europe and Africa.‎

The European gas market is the largest market in which there is active gas-on-gas competition ‎‎(between imports predominantly from Russia – competing against LNG imports – largely from the US ‎as the marginal source of LNG). The European market also plays a key role as the balancing market ‎for liquefied natural gas (LNG) cargoes.

Natural gas major trade movements 2020 – trade flows worldwide (billion cubic metres)

Source: Includes data from CISStat, FGE, IHS Markit, PIRA Energy Group, Waterborne, Wood Mackenzie.

As LNG imports have increased in recent years it has raised the question of the extent to which ‎Russia and other pipeline gas exporters will compete against LNG to maintain their market share or ‎instead forgo some of that share to avoid driving prices too low. With European gas imports falling ‎by over 8½ % last year, we might learn something from the response of producers to the pandemic.‎

Although there is lots of complicating detail, it appears that Russian exporters were prepared to ‎forgo some market share last year. Pipeline imports from Russia as a share of European gas demand ‎fell from 35% in 2019 to 31% in 2020, with much of the reduction happening in the first half of last ‎year. In contrast, LNG imports were up year-on-year in the first half of 2020 and their share of ‎European demand for the year as a whole was broadly unchanged at 21%.

However, as to whether this provides a guide to the future behaviour of Russian pipeline exports is ‎less clear, as the response to short term falls in demand is likely to be different to a longer term fall ‎in demand.‎

Natural gas prices

Natural gas prices declined to multi-year lows: US Henry Hub averaged $1.99/mmBtu in 2020 – the ‎lowest since 1995, while Asian LNG prices (Japan Korea Marker) registered their lowest level on ‎record ($4.39/mmBtu).‎