IEEJ：August 2017 © IEEJ2017

Gas Market Report 2017IEEJ Seminar, Tokyo, 21 July
Keisuke SADAMORI, Director, Energy Markets and Security, IEA

IEA© OECD/IEA 2017

IEEJ：August 2017 © IEEJ2017

Gas in today’s world The contribution of gas• Versatile fuel within the energy system, helping to address environmental concerns• In 2016 gas became the leading power generation source in the US
 An abundant fuel, but strong competitive pressures, especially in Asia
• Space for gas squeezed between renewables and coal in some markets
 A second natural gas revolution is underway, this time caused by LNG• A new surge in LNG export capacity is helping unconventional gas go global• Low prices continue, bringing new LNG-importing countries into the market
 Strategic & environmental role of gas deserves attention from policy makers© OECD/IEA 2017

IEEJ：August 2017 © IEEJ2017

Demand growth moves from power generation to industrial sector
Demand growth by sector

400

bcm

1.5%

1.6%
Energy industry own use

300

Transport

200

Residential/commercialIndustry

100
0Power sector
2010-16

2016-22

China, US and India account for half of the growth in industry sector, driven by chemicals and fertilisers© OECD/IEA 2017

IEEJ：August 2017 © IEEJ2017

Demand growth focuses in developing countries
Global demand growth is around 360 bcm in 2016-22

bcm
350
250

Rest of theworld

150

MiddleEast
DevelopingIndia
economies50- 50

Developed
Australia
economies
United States
Japan + Korea
2016-22

CanadaEurope

China

2016-22Developing countries account for around 90% of the incremental demand
The United States accounts for most of the growth in the developed economies© OECD/IEA 2017

IEEJ：August 2017 © IEEJ2017

The United States accounts for 40% of global production growth
Global production growth, 2016-22

United StatesMiddle East
ChinaAustralia
RussiaEurope- 4004080120

bcm

160

The Middle East will continue its production growth
China will become the 4th largest gas producer© OECD/IEA 2017

IEEJ：August 2017 © IEEJ2017

Low production cost supporting continuous growth
300

bcm

Production volumes and cost of the Marcellus play, 2007-22

USD/MMBtu

12.0

250

10.0

200

8.0

150

6.0

100

4.050

2.00

2007

2009
2011
Marcellus production

2013
Henry Hub2015
2017
Dominion South2019
2021
Wellhead breakeven gas price0.0

The Marcellus, one of the largest fields worldwide, will grow by 45% in 2016-22
Ensuring pipeline access would be vital© OECD/IEA 2017

IEEJ：August 2017 © IEEJ2017

US LNG’s destinations driven by premium in 2016
US LNG merit order among regions, 20166

Share of US LNG destination by region, 2016
Europe10%

USD/MBtu

5Margin

4

MENA
14%

Shipping cost

3115% HH

2Americas
46%

Asia
30%

10Americas

MENAAsia

EuropeIn 2016, US LNG was exported to destinations which have higher margin© OECD/IEA 2017

IEEJ：August 2017 © IEEJ2017

Decreasing European production, increasing import needs

300

European gas balancebcm

Net importProduction
20010020162022

European import requirement grows steadily with flat demand and declining production
It is up to competition between pipeline and LNG to fill this gap© OECD/IEA 2017

IEEJ：August 2017 © IEEJ2017

Second wave of additional LNG supply is already coming online
Incremental LNG capacity , 2005 - 2022 (bcm)60

bcm
Others50

Russia

4030

Qatar

20

United States

100

Australia
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

15 new projects with total export capacity of around 140 bcm are now under construction
Australia and the United States account for 75% of them
© OECD/IEA 2017

IEEJ：August 2017 © IEEJ2017

Demand in developing countries reshaping the LNG market
LNG import volumes , 2012 - 2022 (bcm)

300

bcm

250
Other developing countries

200

India

150

China

100

Developed countries

500

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

China, India and other developing countries will import more than 50% of all LNG by 2022
© OECD/IEA 2017

IEEJ：August 2017 © IEEJ2017

United States will join the club of top gas exporters
Top gas exporters20162022
RussiaQatar
NorwayCanadaAustralia
United States- 50

050100150200250bcm
bcm

A wave of new LNG supply, led by the US, will provide more options to guard against supply shocks,
changing the gas security equation© OECD/IEA 2017

IEEJ：August 2017 © IEEJ2017

Conclusion
 Lower prices help gas to strengthen its foothold in Asia••

Developing countries account for 90% of demand growth, China alone for 40%
Industrial consumers take over from power generation as the main source of growth The US takes the lead on global supply as the shale revolution gets a second wind•

The US generates almost 40% of the rise in global output & the largest increase in exports

 New diversity to global supply & trade, with new entrants on demand & supply side
 A glut of LNG continues to put pressure on markets•

Challenges to existing suppliers, business models and pricing mechanisms

 Even though markets remain well supplied, recent events remind us that gas security
cannot be taken for granted© OECD/IEA 2017