The IEA gas outlook Ambassador Richard H. Jones Deputy Executive Director
Key highlights Gas demand has recovered strongly in 2010 It continues to increase in 2011, except in Europe Medium-term outlook shows strong growth Unless the world enters a deep economic recession Is the world heading towards a Golden Age of Gas? What are the conditions for a Golden Age of Gas? The impact of the shale gas revolution
bcm Review of the Year 2010 World gas demand recovered by 7.4% in 2010 An increase by around 230 bcm OECD recovered by 5.9% Non-OECD rose by 8.9% This overshadows the 2.5% drop in 2009 300 250 200 150 100 50 0-50 Yearly demand changes 2006-10 Non-OECD OECD Abundant supply was there to meet demand Production increased in all regions North American unconventional gas production continued to impact the world LNG trade increased by almost 60 bcm to reach 300 bcm Part of the excess of supply was absorbed by resurgent demand Global gas markets tightened in 2010-100 2006 2007 2008 2009 2010
But the recovery in the OECD is partially an illusion As it is mostly driven by exceptional weather Incremental Gas demand 2010 over 2009 Demand in 2010 568 bcm 841 bcm 185 bcm OECD gas demand has recovered to levels 3% above 2008 Demand was actually driven by very cold weather in Europe and OECD Pacific and a hot summer in OECD Pacific OECD Europe gas demand dropped by 6.5% over Jan-Aug 2011 While demand grew in the US and Pacific region
China is emerging as a major demand driver China s gas demand now above Germany s, rising at 20% a year Investments in domestic supply and import infrastructure (LNG, pipelines to Myanmar and Turkmenistan
Why China is interested in natural gas 1: growing cost of domestic coal 9
Why China is interested in natural gas 2: environmental impact
bcm Medium-Term Forecasts World gas demand is expected to grow at 2.4% over 2010-16 Demand growth will slow down compared to 2010 The 510 bcm demand increase over 2010 will happen mostly in the non-oecd region 300 250 200 150 100 50 0-50 Yearly demand changes 2009-16 Non-OECD OECD -100 2009 2010 2011 2012 2013 2014 2015 2016 90% of the incremental supply is projected to come from the non- OECD region Half of additional supply will come from the Middle East and FSU LNG trade is set to expand markedly, especially after 2015 OECD supply is schizophrenic, with a sharp drop in Europe compensated by North American unconventional gas and Australian supplies
bcm Global gas demand growth accelerates More rapid than total energy demand growth 600 500 400 300 200 100 0 2005-10 2010-16 Europe North America OECD Pacific Latin America E. Europe/Eurasia Africa Middle East China Asia Fastest growing markets are China and the Middle East Europe all but stagnates, but is linked to growth centers by LNG
Are we entering a Golden Age of Gas? Objectives of the report: Examine factors that could result in a more prominent role for gas Assess implications for all fuels, energy security & climate change Key drivers of the GAS Scenario Widespread development of unconventional gas Lower gas prices Gas targets in China s 12 th Five-Year Plan Reduced growth of nuclear energy Increased deployment of natural gas vehicles WEO-2010 New Policies Scenario serves as benchmark for comparison
Mtoe Golden Age: Gas is the single biggest contributor of primary energy growth World primary energy demand by fuel in the GAS Scenario 5 000 4 000 3 000 2 000 1 000 Oil Gas Coal Biomass Nuclear Other renewables Hydro 0 1980 1990 2000 2010 2020 2030 2035 Gas overtakes coal before 2030 and meets one quarter of global energy demand by 2035
WEO NPS 2011: Gas is the single biggest contributor to growth but does not catch up with coal Global primary energy demand, in WEO NPS, mtoe 5 000 4 000 Coal Oil 3 000 2 000 Gas Nuclear Hydro 1 000-1990 2009 2015 2020 2025 2030 2035
Power sector drives gas demand in the Golden Age Change in power generation by fuel in the GAS scenario, 2010-2035 Gas Wind Other renewables Coal Hydro Nuclear Oil -1 000 0 1 000 2 000 3 000 4 000 5 000 TWh Total electricity demand increases 70% by 2035, underpinned by a near doubling of gas-fired generation
In NPS Coal remains the biggest driver, but renewables and gas catch up Change in power generation by fuel in WEO NPS 2011, Twh Coal Gas other renewables Wind Hydro Nuclear Oil -1000 0 1000 2000 3000 4000 5000
United States The taste of things to come? 280 TWh coal to gas switch in 3 years
Germany: Even with policy success, gas will be needed to deliver CO 2 reductions German electricity mix with 10% demand reduction, no nuclear, 35% renewables and CO 2 at the target level
Japan is reconsidering its nuclear-centric energy policy with potentially large impact 600 TWh/y 500 Nuclear in Pre-Fukushima-Daiichi energy strategy 10 bcm LNG burned in CCGTs: 60 twh 400 300 200 100 2010 nuclear production Current nuclear production? Building Power demand growth halved by efficiency: 85 twh the current EU PV capacity in Japan: 25 twh 0 2011 2015 2020 2025 2030 2035
Middle East and FSU are set to be the largest contributors to supply But other regions are contributing as well bcm 600 Asia 500 China 400 FSU Middle East 300 Africa Non-OECD Europe 200 Latin America OECD Pacific 100 OECD North America OECD Europe 0-100 2005-10 2010-16 Middle East production increases more moderately FSU is growing fast (or recovering, in the case of Russia and Turkmenistan) China, Australia emerge as significant producers European domestic production continues to decline
Gas resources estimated to represent 250 years of current gas production Recoverable Gas Resources There are over 400 tcm of estimated recoverable unconventional gas resources, half of them are shale North America considers LNG exports
Unconventional gas leaves North America Mainly to China Largest gas producers in the GAS Scenario, 2035 Unconventional gas supplies 40% of the 1.8 tcm increase in gas demand to 2035, making up nearly one quarter of total production
Shale gas in Europe: slower ramp up than in the US Geology less favorable than in the US Higher population density Lack of an onshore industry tradition skilled labor, service companies etc. Aso, the legal climate and infrastructure are better in the US But: shale gas competes with oil indexed import gas at 3 times the Henry Hub price
CIS: Yamal dominates Russia: 90% of the production increase is Yamal Turkmenistan: Ramp up of Chinese exports Southern Coridor: Shah Deniz and Iraq as potential game changers
Future LNG Production Capacity 6 LNG projects reached FID since 2010 (5 in Australia, 1 in Indonesia) Second LNG Wave of 100 bcm expected over 2012-17 Mostly from the Pacific targeting Asian markets Will it arrive on time? Global LNG production capacity could reach up to 540 bcm by 2020
What does this imply for Europe? EU Gas demand and production EU gas demand to reach 636 bcm by 2035, while domestic production declines progressively to less than 100 bcm Imports increase by 70% between 2008 and 2035 Sources of imports are expected to become more diversified in the long term
Gas alone is insufficient to tackle climate change CO 2 emissions in the GAS Scenario compared with the New Policies Scenario, 2035
Conclusions Gas is the fastest growing fossil fuel, it will continue to increase its share in the global primary energy mix China is emerging as the biggest driver of gas demand growth Non conventional gas plays an increasing role and has a potential to transform gas supply security LNG increasingly links regions and demand centers, flexible LNG enhances supply and demand security For a genuine Golden Age, adequate environmental standards and efficient markets will be essential Even in the Golden Age of Gas, large scale deployment of low carbon energy is needed to tackle climate change
Annex 1: Environmenal issues of shale gas Fugitive methane emissions Drinking water contamination Water usage in dry regions (Texas, Xinjiang) Seismic effects of fracking Also an issue with conventional gas.can be tackled by adequate gas gathering and pipeline management. Studies show a marginal increase of lifecycle emissions with proper management. Almost a million frack jobs in the US since the 50s. Water table more than a km above the fracking. Disclosure of fracking chemicals started. Adequate wellbore management needed. EPA study ongoing. 10-15 million liters/frack jobs (times thousands of fracks). Recycling of fracking water is not a choice. Research ongoing. More intensive reservoir modelling and less reliance on brute fracking force might be necessary.
Annex 2: Discoveries in the Eastern Mediterranean Israel currently relies on depleting domestic production and unreliable Egyptian supplies Tamar: Likely to serve domestic consumption; gas will likely land via a pipeline to an existing platform offshore Ashkelon Leviathan: A giant field (450 bcm confirmed, potential 700+), suitable for exports On the borderline between Israeli, Libanese and Cypriot waters, engineering optimum seems to be an LNG train in Cyprus, but: A densely built, touristic area Involving Cyprus in the project could impact overal political relations between Turkey and Israel Consortium seems to favor floating LNG, but that is a frontier technology (the first FLNG, Pluto is expected to come on line in 2017) Sea depth makes pipelines a difficult option Can it be done without a Grand bargain between Turkey and Israel?