The Future Role of Gas GECF Global Gas Outlook 24 Insights Presentation for the 3rd IEA-IEF-OPEC Symposium on Gas and Coal Market Outlooks Dmitry Sokolov Head of Energy Economics and Forecasting Department Gas Exporting Countries Forum Secretariat 14 December 216
Disclaimer The Gas Exporting Countries Forum (GECF) is an international, governmental organization, established in 21. It became a full-fledged organization in 28 with its permanent secretariat based in Doha, Qatar. The GECF provides the framework for exchanging experience and information among Member Countries. The GECF is a gathering of the world s leading gas producers whose objective is to increase the level of coordination and to strengthen collaboration among MemberCountries. In accordance with the GECF Statute, the organization aims to support the sovereign rights of its Member Countries over their natural gas resources and their abilities to develop, preserve and use such resources for the benefit of their peoples, through the exchange of experience, views, information and co-ordination in gasrelated matters. The Member Countries of the Forum are: Algeria, Bolivia, Egypt, Equatorial Guinea, Iran, Libya, Nigeria, Qatar, Russia, Trinidad and Tobago, the United Arab Emirates and Venezuela. Azerbaijan, Iraq, Kazakhstan, the Netherlands, Norway, Oman and Peru have the status of Observer Members. The Outlook is the result of GECFGlobal Gas Model (GGM) calculations. The data, forecast and analysis and any other information contained in this report are for information purposes only. GECF Global Gas Outlook 24-2 - GECF Secretariat, 47-48 Fl., Tornado Tower, West Bay, Doha, Qatar
Contents Introduction and scope Main outlook assumptions Global energy demand trends Gas demand outlook Main global gas supply assumptions Global gas production and trade outlook Conclusion GECF Global Gas Outlook 24-3 - GECF Secretariat, 47-48 Fl., Tornado Tower, West Bay, Doha, Qatar
Introduction and scope The document offers a neutral view on gas market evolution by describing the developments that are most likely to occur in the medium and the long-term. The outcomes of the GECF reference case scenario will serve as a basis to support the formulation of a consistent long-term strategy for the Forum on which it should be aligned, which will allow progress in the agreed objectives that are included in the GECF statute and in various GECF summit declarations. Future versions of the document will explore alternative scenarios. The quantification of the reference case scenario is elaborated through the use of the GECF Global Gas Model, which is a unique energy model developed in-house at the GECF Secretariat. It includes several sub-models with each one focused on one segment of the gas value chain (production, pipelines, LNG, shipping, regasification, contracts and demand). The originality of GECF model is characterized by its high granularity both for demand and for supply, with the consideration of more than 1 countries for the demand and almost 1 countries for the supply representing almost 5 production entities worldwide. A further important characteristic of the model is that it endogenously calculates gas demand curves and gas production profiles country by country, according to appropriate assumptions and inputs. All of the sub-models have been calibrated and based on 215 as the most recent year of available historical data. GECF Global Gas Outlook 24-4 - GECF Secretariat, 47-48 Fl., Tornado Tower, West Bay, Doha, Qatar
Real GDP growth assumptions (MER - %) 1 9.8 9 8 7.9 7.9 7.2 7 6 5 4 3 2 2.9 3.7 3.1 2.9 3.1 3. 2.1 2.5 1.6 1.9 1.8 2.3 1.8 1.7 1.8 1.3 1.6 1.3 6.1 4.8 4.2 4.6 2.4 2.5 6.1 6.3 4.8 4.7 6.2 3.2 3.2 2.9 4.8 4.7 4.5 4.1 4. 3.6 3.4 2.4 3.1 1 World GECF Members OECD North America OECD Europe OECD Asia- Pacific Non-OECD CIS Non-OECD Asia China India Non-OECD Europe Middle-East Africa Latin America 2-214 215-22 215-24 The 2.9% average annual growth rate in the outlook period is almost equal to the historical average rate from 2. In the short term, while growth in some advanced economies is gradually picking up, growth in the emerging economies shows signs ofwavering. Key contributing factors are the impact of low commodity prices, tighter financing conditions, and the rebalancing measures in China; these result in weak investment and slower trade growth worldwide, in a setting of increased geopolitical tensions. GECF Global Gas Outlook 24-5 - GECF Secretariat, 47-48 Fl., Tornado Tower, West Bay, Doha, Qatar
Average annual growth rate of population by major region (%) 3 2.5 2 1.5 1.5 1.2 1..8 1.5 1.4 1.3.7.5.4 1..8.7.5.3.2.4.2 1.3 1.1.9.1 1.1.8.6.5.4.1 1.5 1.1.8 2.3 1.8 1.5 2.5 2.2 2. 1.2 1..7 -.5-1 World GECF Members OECD North America OECD Europe OECD Asia- Pacific -.1 Non-OECD CIS Non-OECD Asia -.4 -.5 -.6 China India Non-OECD Europe Middle-East Africa Latin America 2-214 215-22 215-24 Global population rising from 7.3 billion in 215 to 8.9 billion in 24. Population growth slows over the projection period, in line with the trends of the last three decades: from 1.% per year in 215-22 to.7 % per year from 22 to 24. A remarkable transformation in the non-oecd Asian societies, from largely rural (over 7% in 199) to increasingly urban (44% urban population in 215 and forecast to be 56% by 24). GECF Global Gas Outlook 24-6 - GECF Secretariat, 47-48 Fl., Tornado Tower, West Bay, Doha, Qatar
World energy demand by fuel (Mtoe) 18 16 14 12 1 8 6 4 2 199 1992 1994 1996 1998 2 22 24 26 28 21 212 214 216 218 22 222 224 226 228 23 232 234 236 238 24 Oil Natural Gas Coal Nuclear Hydro Renewables World primary energy consumption is projected to grow by 1% per annum between 215 and 24, climbing from 13.8 Gtoe to 17.7 Gtoe. Natural gas will be the largest contributor to the increase in total primary consumption, with a share of almost 4%, followed by non-hydro renewables, which account for almost 3% of additional primary energy demand over the projection period. GECF Global Gas Outlook 24-7 - GECF Secretariat, 47-48 Fl., Tornado Tower, West Bay, Doha, Qatar
World energy mix (%) 199, 8797 Mtoe 7% 3% 24, 17733 Mtoe 5% 2% 6% 2% 28% 12% 16% 32% 11% 37% 25% 28% Oil Gas Coal Renewables Nuclear Hydro 21% 19% 21% 25% 215, 13847 Mtoe Except coal, all other types of energy show growth over the outlook period. Gas is the fastest growing fossil fuel, with a 1.6% average growth rate per annum, and gains the most market share among all energy types except the non-hydro renewables. Indeed, under the Outlook, the gas share of global energy demand increases from 21% in 215 to over 25% in 24 * Note: due to rounding, numbers may not add up precisely to the totals provided and percentages may not precisely reflect the absolute figures. GECF Global Gas Outlook 24-8 - GECF Secretariat, 47-48 Fl., Tornado Tower, West Bay, Doha, Qatar
World primary energy demand by sector (Mtoe) 18 16 14 12 1 8 6 4 2 Domestic Industry Transport Feedstock Power Generation Heating & Cooling Refinery Other Over the outlook period, fuel input into power generation grows at 1.6% per annum and remains the main driver of global energy demand. The share of this sector s demand in total energy consumption rises from 34% in 215 to 4% by 24. More than half of world s additional energy needs are presumed to be needed for use in power generation. GECF Global Gas Outlook 24-9 - GECF Secretariat, 47-48 Fl., Tornado Tower, West Bay, Doha, Qatar
Global CO2 emissions, GDP, and energy consumption 45 4 35 3 25 2 15 1 5 Index 199=1 199 1992 1994 1996 1998 2 22 24 26 28 21 212 214 216 218 22 222 224 226 228 23 232 234 236 238 24 GDP Primary Energy CO2 Emission Globally, implementing better energy efficiency measures and shifting the economic structure of the developing countries from high energy-intensity sectors to the low energy-intensity service sector is expected to result in lower global energy intensity per capita and per GDP, and therefore GDP and energy consumption are set to decouple over the outlook period. Furthermore, increasing the penetration of clean fuels, including gas and renewables in countries fuel mix, will also widen the gap between carbon dioxideemissionsandtotal primary consumption GECF Global Gas Outlook 24-1 - GECF Secretariat, 47-48 Fl., Tornado Tower, West Bay, Doha, Qatar
Regional breakdown of primary gas demand (215 and 24) in the Outlook In the OECD region, natural gas approaches oil consumption as a dominant fuel by the end of outlook period with a share of 32% in primary energy by 24. However, in non-oecd, natural gas remain third most-consumed fuel, still behind coal and oil, and reaching a share of around 22% by 24 GECF Global Gas Outlook 24-11 - GECF Secretariat, 47-48 Fl., Tornado Tower, West Bay, Doha, Qatar
Sector gas demand share from global gas consumption, 199-24 1% 9% 8% 7% 6% 5% 4% 3% 2% 1% Other Refinery Heating & Cooling Power Generation Transport Feedstocks Industry Domestic % Overall, through to 24, the share of gas from total gas consumption in the power sector and transport is expected to increase while in industry, district and domestic sector declines and remaining flat in refinery and feedstock sectors. GECF Global Gas Outlook 24-12 - GECF Secretariat, 47-48 Fl., Tornado Tower, West Bay, Doha, Qatar
Power sector demand by fuels (Mtoe) 7 6 5 4 3 2 1 199 1992 1994 1996 1998 2 22 24 26 28 21 212 214 216 218 22 222 224 226 228 23 232 234 236 238 24 oil Natural Gas Coal Nuclear Renewable Hydro Biomass The power sector is by far the biggest source of additional gas demand over the outlook period. In the Outlook gas use in the power sector is projected to grow by 2.2% per year, which is faster than global gas demand growth of 1.6%. As a result, the power sector s share of global gas demand increases from 35% in 215 to 41% by 24. GECF Global Gas Outlook 24-13 - GECF Secretariat, 47-48 Fl., Tornado Tower, West Bay, Doha, Qatar
Natural gas production capacities by region (bcm) 7 6% 6 5 4 3 2 1 5% 4% 3% 2% 1% 215 216 217 218 219 22 221 222 223 224 225 226 227 228 229 23 231 232 233 234 235 236 237 238 239 24 North America CIS Middle East Non-OECD Asia Africa South East Asia Latin America OECD Europe OECD Asia-Pacific Non-OECD Europe GECF% GECF Members% % Global natural gas production capacity is expected to grow on average by 1.9% yearly The GECF as a whole is expected to grow its capacity by around 1.7% per year in the long-term GECF countries share in global gas production capacity is expected to slide slightly to reach an average of 43% throughout 24 compared to a little more than 45% currently. GECF Global Gas Outlook 24-14 - GECF Secretariat, 47-48 Fl., Tornado Tower, West Bay, Doha, Qatar
Production capacities by resource type 7 35% 6 3% 5 25% 4 2% 3 15% 2 1% 1 5% 215 216 217 218 219 22 221 222 223 224 225 226 227 228 229 23 231 232 233 234 235 236 237 238 239 24 Existing New Projects Unconventional - Existing Unconventional - YTF YTF UCV% % Starting from next decade the undiscovered resources (YTF, either conventional or unconventional) will play an important role in meeting demand and are assumed to reach more than 3% of the world total capacity by 24. From currently close to 18%, the capacity of the Unconventionals (reserves and resources included) is assumed to reach 3% of the global production capacity starting from 235. However, we expect that the unconventional production capacity in some key regions to hit a plateau by the end of the outlook time period. GECF Global Gas Outlook 24-15 - GECF Secretariat, 47-48 Fl., Tornado Tower, West Bay, Doha, Qatar
Investment costsby segment of thegassupply chain Investment costs by segment of the gas supply chain (215 Trillion USD) Cumulative investment 215-24 (thousands 215 USD) 7 Liquefaction Plant.26 Pipeline String.14 Regasification Plant.13 6 5 Production Entity 7.48 4 3 2 Regasification Plant Pipeline String Liquefaction Plant Production Entity 1 GECF Non-GECF Total cumulative investment in the upstream and gas transportation system is estimated at USD 8. trillion for the period 215 to 24 (real 215 US dollars). The upstream part should account for the biggest part of this, with more than 9% or almost USD 7.5 trillion, and other segments in liquefaction, regasification and pipeline projects representing the remaining 7-8%. GECF Global Gas Outlook 24-16 - GECF Secretariat, 47-48 Fl., Tornado Tower, West Bay, Doha, Qatar
Global gas production by region (bcm) 6 6% 5 5% 4 4% 3 3% 2 2% 1 1% 199 1992 1994 1996 1998 2 22 24 26 28 21 212 214 216 218 22 222 224 226 228 23 232 234 236 238 24 North America CIS Middle East Non-OECD Asia Africa OECD Europe Latin America OECD Asia-Pacific Non-OECD Europe Total GECF % GECF Members % % In the coming twenty-five years, the average global production growth rate from 215 to 24 is expected to be at around 1.6% (2.1% average annual growth by 22). Thus, global gas production is expected to almost double compared with 199, or increase by almost 5% above today s gas output, increasing to around 5,4 bcmby 24. GECF Global Gas Outlook 24-17 - GECF Secretariat, 47-48 Fl., Tornado Tower, West Bay, Doha, Qatar
Global gas production by field type (bcm) 6 35% 5 3% 4 3 2 25% 2% 15% 1% 1 5% 215 216 217 218 219 22 221 222 223 224 225 226 227 228 229 23 231 232 233 234 235 236 237 238 239 24 Existing New Projects Unconventional - Existing Unconventional - YTF YTF UCV Share % % The share of unconventional gas is expected almost to double from currently around 15% to almost 3% by 24. GECF Global Gas Outlook 24-18 - GECF Secretariat, 47-48 Fl., Tornado Tower, West Bay, Doha, Qatar
Global gas production by GECF and non-gecf countries (bcm) 6 5 4 3 2 1 199 1992 1994 1996 1998 2 22 24 26 28 21 212 214 216 218 22 222 224 226 228 23 232 234 236 238 24 Non GECF GECF Observers GECF Members GECF Members gas output is expected to rise to around 1,63 bcm in 22 (39% of the world total), to over 1,7 bcm (37%) in 23, and to almost 2, bcm (39%) in 24 The share of the GECF member countries in global marketed gas production is expected to remain relatively stable at an average of 38% during the outlook period, while the historical average starting from 199 was about 37%. GECF Global Gas Outlook 24-19 - GECF Secretariat, 47-48 Fl., Tornado Tower, West Bay, Doha, Qatar
Global gas demand composition (bcm) 6 5 4 3 2 1 199 1992 1994 1996 1998 2 22 24 26 28 21 212 214 216 218 22 222 224 226 228 23 232 234 236 238 24 Non GECF GECF Observers GECF Members It is estimated that currently global gas trade represents around 3% of all global gas marketed production. This share is expected to remain at that level by 24, although the global gas trade is expected to expand in absolute levels by 6%. Regionally and at country level the situation is somehow different, as the needs and the conditions of each region differ from the other, both regarding possibilities of domestic supply and also prospects of gas demand. GECF Global Gas Outlook 24-2 - GECF Secretariat, 47-48 Fl., Tornado Tower, West Bay, Doha, Qatar
Global gas tradegecf/non-gecf (bcm) 18 16 14 12 361 259 646 1 8 6 4 2 387 649 111 215 GECF Non GECF 24 The volume of the global gas trade is expected to increase, from 215 levels, by 6% by 24 reaching a level of 1,65 bcm, growing by almost 2.1% annually on average. GECF members averaged a market share of 46% in the last twenty years in global gas trade; we expect this share to remain in this range by 24 GECF Global Gas Outlook 24-21 - GECF Secretariat, 47-48 Fl., Tornado Tower, West Bay, Doha, Qatar
Global gas trade by LNG and pipe (bcm) 18 16 14 12 1 8 6 4 2 199 1992 1994 1996 1998 2 22 24 26 28 21 212 214 216 218 22 222 224 226 228 23 232 234 236 238 24 Pipe LNG LNG Share GECF Share GECFM% 7% 6% 5% 4% 3% 2% 1% % A little more than 1, bcm of gas was traded globally in 215, of which almost 3 bcm was LNG (3%) and the remaining. By the mid-22s international gas trade is expected to exceed 1,25 bcm, with potentially 43% associated with LNG. After that, LNG trade slows and stabilizes in the 4-45% range, because of the parallel growth in piped gas by 23, especially from CIS to Non-OECD Asia. On an annual average basis, LNG trade will grow by 2.8%. GECF Global Gas Outlook 24-22 - GECF Secretariat, 47-48 Fl., Tornado Tower, West Bay, Doha, Qatar
Contracted trade vs. spot trade (bcm) 18 16 14 12 1 8 6 4 2 215216217218219222212222232242252262272282292323123223323423523623723823924 Obligated trade Free trade %Obligated %Obligated_no extension 12% 1% 8% 6% 4% 2% % The unconstrained international gas trade that can be contracted either through spot or potentially other long-term deals, will grow significantly at about 6% per year. From around 12% share of total gas trade, it will represent roughly 3% by the end of the outlook period in 24. GECF Global Gas Outlook 24-23 - GECF Secretariat, 47-48 Fl., Tornado Tower, West Bay, Doha, Qatar
Marginal costs of gas delivered in some regional markets (Real USD Per MMBtu) 2. 18. 16. 14. 12. 1. 8. 6. 4. 2.. 199 1992 1994 1996 1998 2 22 24 26 28 21 212 214 216 218 22 222 224 226 228 23 232 234 236 238 24 Argentina China India United States Japan Germany United Kingdom There are some extreme peak supplies (the needle peak ) that cause sharp increases in the marginal cost of supply in some key importing regions In some Asian markets (Japan, China) the marginal costs vary from USD 7.5 to 12./MMBtu, while India receives slightly lower price levels. GECF Global Gas Outlook 24-24 - GECF Secretariat, 47-48 Fl., Tornado Tower, West Bay, Doha, Qatar
Conclusion Gas demand and supply remain coordinated during the Outlook period, even though some short periods of disequilibrium might occur, and long-term contracts act asthe tool to manage the volume and price risk. The gas industry in all countries will require significant investments in order to deliver new gas to domestic and to export markets. The Outlook emphasizes the importance of maintaining contractual relationships between the buyers and sellers in international gas trade that will support the needed investment. Sellers and buyers will require that the risks in both volume and price can and will be effectively managed. The work shows that GECF members are in a position to maintain, throughout the period to 24, the share in international trade that is implied by the leastcost solutions of our modelling and forecasting exercise. The role of natural gas in the battle with greenhouse gas emissions gains momentum especially after the ratification of the COP21 agreement. The GECF Secretariat will continue to support GECF members both in dialogue in the international community and with analytical support such as that contained in thisedition of GECF Global GasOutlookto 24. GECF Global Gas Outlook 24-25 - GECF Secretariat, 47-48 Fl., Tornado Tower, West Bay, Doha, Qatar