Gas Demand Set to Keep Rising

Gas Demand Set to Keep Rising

 

Global demand for natural gas is set to rise by more than 10 percent over the next five years, reaching 4.3 trillion cubic meters in 2024.

That’s according to the International Energy Agency (IEA), which revealed that China is expected to account for more than 40 percent of gas demand growth to 2024. The IEA also sees strong growth in gas consumption in other Asian countries, particularly in South Asia.

China’s demand growth will be propelled by the government’s goal of improving air quality by shifting away from coal, according to the IEA. In Bangladesh, India and Pakistan, the industrial sector is the main contributor to growth, the IEA revealed.

Demand for natural gas grew 4.6 percent last year, the IEA highlighted. The organization said this was the fastest annual pace since 2010.

“Natural gas helped to reduce air pollution and limit the rise in energy-related CO2 emissions by displacing coal and oil in power generation, heating and industrial uses,” Fatih Birol, the IEA’s executive director, said in an organization statement.

“Natural gas can contribute to a cleaner global energy system. But it faces its own challenges, including remaining price competitive in emerging markets and reducing methane emissions along the natural gas supply chain,” he added.

Earlier this year, Equinor revealed that it expects global gas demand to grow by around 10 percent towards 2030. Back in February, the company said it sees “strong market opportunities for gas”.

Equinor sold natural gas for around $26 billion in total in 2018, an increase of 29 percent from 2017. The company is the largest producer of natural gas on the Norwegian continental shelf and the second-largest gas supplier to Europe.

Founded in 1974, the IEA was initially designed to help countries co-ordinate a collective response to major disruptions in the supply of oil. Last month, the IEA cut its oil demand growth forecast for 2019 to 1.3 million barrels per day.

 

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Global demand for gas will grow by around 10 percent towards 2030.

That’s what Equinor expects, according to a statement posted on its website on Thursday, which revealed that the company sees “strong market opportunities for gas”.

In an energy scenario consistent with the two-degree climate target, global gas demand would only be “slightly lower” than today even in 2050, Equinor said in the statement. That entails “massive needs” for investment in future gas supply “in the decades to come,” Equinor stated.

“Global energy markets are changing. The world needs more energy, but lower emissions. Natural gas is well positioned to provide secure, competitive and sustainable energy to consumers and industry,” Irene Rummelhoff, Equinor’s executive vice president for marketing, midstream and processing, said in a company statement.

Equinor sold natural gas for around $26 billion in total in 2018, an increase of 29 percent from 2017. The company is the largest producer of natural gas on the Norwegian continental shelf and the second-largest gas supplier to Europe.

Earlier this year, Equinor announced a gas and condensate discovery south of the Kristin field in the Norwegian Sea. Recoverable resources at the find are estimated at between 6 and 25 million barrels of oil equivalent.

Norway-headquartered Equinor is an international energy company present in more than 30 countries worldwide. The company changed its name from Statoil in May 2018 to support its strategy as a broad energy company.

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Russia’s strong natural gas shipments to Europe may be an attempt to test the resilience of U.S. exporters, according to Citigroup Inc.

Shipments this year from Russia have helped boost European gas storage to near full capacity and exacerbated the region’s oversupply, the bank’s analysts including Ed Morse wrote in a June 9 report. One motivation for not cutting that supply -- which would help prices recover -- could be that Moscow is “testing the response of the global gas market in a low price environment, especially U.S. LNG export elasticity.”

Given the current storage levels in Europe, restricting U.S. LNG exports for two months may make sense, according to Citigroup. That could trim about 400 billion cubic feet of supply in late summer and early fall, roughly equivalent to the inventory overhang in Europe. Otherwise, Russian pipeline exports to Europe may have to fall by as much as 15% year-on-year to balance the market, it estimates.

Pain for U.S. gas exporters caused by Russian supply has the potential to further politicize competition in the European gas market. While American LNG sales to Europe are a fraction of what the region gets by pipeline from Russia, the U.S. has framed its energy supplies as an alternative to reliance on Moscow. The Department of Energy has even tried highlighting the foreign policy implications of the nation’s exports by labeling it “freedom gas.”

Cutting Forecasts

If Russia is seeking to test the global market, then low LNG prices could last through fall and possibly into next winter, the bank said. Besides the U.S., lower supply from Malaysia, Indonesia and eastern Australia could also be possible, though the volume is questionable, Citigroup said. The bank highlighted a press conference by Russia’s Gazprom PJSC, coming up on June 18, as providing potential insight into its export strategy to Europe.

Given the oversupply, Citigroup cut its gas price forecasts for this year by as much as 18%. U.S. Henry Hub is seen at $2.50 per million British thermal units, European Title Transfer Facility at $5 and Asia’s Japan/Korea Marker benchmark at $5.80.

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The US will maintain oil production despite falling prices, says deputy energy secretary

  • Despite low oil prices, shale producers in the U.S. will continue to produce 12 million barrels a day — which are all-time highs — throughout next year, and perhaps going up to as high as 13 million barrels, U.S. Deputy Energy Secretary Dan Brouillette told CNBC on Wednesday.
  • While shale drillers in the U.S. have been said to face obstacles on growing output, and the number of operating oil rigs have declined this year, Brouillette said that production is not actually the biggest problem.
  • Meanwhile, Chinese tariffs on U.S. natural gas will not put a dent in the country’s ambitions to be a top energy exporter, he indicated, citing high demand from the rest of Asia.
  • The U.S. will maintain its oil production — or even ramp it up higher — despite low energy prices and slowing economic growth, Deputy Energy Secretary Dan Brouillette said Wednesday.

    Shale producers in the U.S. will continue to produce a record 12 million barrels a day throughout next year, he said, citing projections from the Energy Information Administration. They may even go up to as high as 13 million barrels, he added.

     

    “U.S. production numbers are going to continue for quite some time,” Brouillette told CNBC.

    U.S. West Texas Intermediate (WTI) crude futures have fallen almost 20% since reaching their 2019 peaks in late April, as oil prices were dragged down by intensifying fears of an economic downturn that’s started to impact oil consumption.

    But Brouillette rejected fears that oil demand would be hit amid slowing growth.

    “Growth is slowing down slightly ... over the course of early 2019. But I suspect that as the economy begins to rev up, we’ll start to see that demand pick up as well. And it’s going to be good news for oil producers,” he said.

    On Wednesday, Brent crude futures were at $61.34 per barrel, and U.S. crude futures were at $52.40 per barrel — off this year’s highs of around $74 and $66 per barrel in April.

    Even though shale drillers in the U.S. have been said to face obstacles on growing output amid a wave of belt-tightening that’s cutting billions of dollars from budgets, and the number of operating oil rigs have declined this year, Brouillette said that production is not actually the biggest problem.

    “Our biggest challenge in the United States is not maintaining production, it’s actually getting the product to market. We are developing infrastructure ... at a rapid pace, but we need to do more. We need more pipeline capacity in order to have the oil and the gas reach these export markets,” he said.

    In fact, Brouillette said, there will be increased production, not falling output, in the U.S.

    Last year, the global appetite for natural gas grew at the fastest pace since 2010. Most of that supply is expected to come from the U.S., amid its ambitions to be a top liquefied natural gas (LNG) exporter.

    American gas output surged by 11.5% in 2018 — marking the fastest growth since 1951, according to the International Energy Agency. Currently, Australia and Qatar are the top two exporters of LNG, which is a form of the fuel chilled to liquid for transport by sea.

    But amid the trade war, Chinese tariffs on U.S. natural gas could put Washington’s ambitions on hold, with the Asian giant accounting for a large share of global demand and taking the spot as the world’s number 2 importer for LNG.

    Brouillette dismissed that notion, however, pointing to high demand from the rest of Asia.

    He said that sales to South Korea and Japan look “very, very large” relative to China. With Mexico numbers added to that tally, “the future looks pretty bright,” he added.

    “We still see continued LNG export growth all throughout the world,” Brouillette added.

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Shale deposits drawing plastics attention to Ohio Valley

Houston — The shale-rich Ohio Valley region continues to draw interest from materials firms because of its abundant supplies of natural gas.

The region now produces 50 percent more oil and gas than it did during its previous peak in the 1970s, Greg Kozera said June 5 at Global Plastics Summit 2019 in Houston. Kozera is marketing director for Shale Crescent USA, a trade group that promotes the Ohio Valley region of Ohio, Pennsylvania and West Virginia to potential investors.

Shell Chemical is making the region's potential a reality with a massive petrochemicals project near Pittsburgh that's set to open in the early 2020s. That project will include around 3.5 billion pounds of annual production capacity for polyethylene resin.

Shell, which is based in Houston and London, chose the western Pennsylvania site because of the availability of natural gas via hydraulic fracturing (fracking) from the Marcellus and Utica shale deposits. Shell officials also have touted the proximity of the region to a large number of American consumers and end markets.

 

A similar resin and feedstocks joint venture in Dilles Bottom, Ohio, is being analyzed by PTT Global Chemical of Thailand and Daelim Industrial Co. of South Korea.

At GPS 2019, Shale Crescent USA business manager Nathan Lord said that 85 percent of U.S. natural gas production growth from 2008-18 took place in the Ohio Valley. The region "produces more natural gas than Texas with half of the land mass," he added.

The area "is based on top of feedstock and in the center of customers," he added. "And a large amount of the U.S. population is within a one-day drive."

Lord also cited a 2018 study from IHS Markit, which co-hosted GPS 2019, that showed the Ohio Valley has a 23 percent cost advantage on PE and a 10-11 percent advantage on polypropylene vs, the U.S. Gulf Coast for material made and shipped in the same region.

"It comes down to a shipping advantage," he said. "Shell will be able to deliver material in 25-45 hours instead of in 25-45 days from the Gulf Coast."

"The challenge is to see the opportunity and go for it," Kozera added.

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Low natural gas prices drive up generation share in US Midwest

Gas-fired power 25% less expensive than coal

Switching may boost July, August power burn

Low natural gas prices in the Midwest have helped boost gas-fired generation in the region this year and could lead to even greater coal-to-gas switching during the peak summer months of July and August.

 

 

Total electricity loads across the Midcontinent Independent System Operator shows coal has dropped by 9 average GW year on year while gas-fired generation has increased by 0.6 average GW year on year, according to MISO data.

In fact, gas as a percentage of thermal loads is averaging 45% month to date in June, or nearly 10% higher year on year. For the summer in general, gas as a percentage of thermal loads are averaging 46%, or roughly 6%, higher year on year.

Looking ahead, seasonally expanding loads should help drive gas burns higher. Notably, relative to June's month-to-date average, S&P Global Platts Analytics forecasts total loads within MISO will average about 90 average GW and total gas generation will be 25.7 average GW, up 18% and 14%, respectively.

Based on Platts Analytics reference prices, gas as a percentage of thermal loads is forecast to average 42% for the peak summer months of July and August, 3% higher than last year. But the recent selloff in both Henry Hub and regional gas hub prices will likely stimulate higher than expected levels of coal-to-gas switching. This would allow gas to take more incremental market share than previously expected.

COAL-TO-GAS SWITCHING

Regarding switching, with Chicago city-gates pricing below $2.15/MMBtu over the next few months, gas is much more economical relative to coal across MISO's North and Central regions. Looking at delivered coal costs to the region, and adjusting for a gas-fired combined-cycle power plant heat rate advantage, gas is trading at more than a 25% discount to the price level over a coal-fired power plant.

Because of this pricing advantage, Platts Analytics sees MISO adding anywhere from 300 MMcf/d to 400 MMcf/d of more-than-expected gas-fired generation over the peak months of July and August.

Part of the higher gas-fired generation stems from a wave of coal plant closures. Nearly 10 GW of coal generation has retired since 2015 while more than 2 GW of gas generation has come online in the Midwest over the same period. Platts Analytics' expects another 2 GW of coal retirements by the end of 2019 combined with 2 GW of new gas-fired generation online by year's end.

The coal retirements played a significant role in the Midwest reaching record-high levels of gas-fired generation last winter. In January, Midwest power burn averaged 3.2 Bcf/d, reaching a single-day, all-time high of 3.9 Bcf/d, according to Platts Analytics. This record occurred despite the Chicago city-gates averaging more than $3/MMBtu for the month.

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World Bank: Global gas flaring up 3% in 2018

Flaring of natural gas rose 3% year-to-year in 2018 to an estimated 145 billion cu m, the World Bank’s Global Gas Flaring Reduction Partnership (GGFR) disclosed on June 12. The growth was associated with increased US crude oil production, although US flaring intensity—the volume of gas flared per barrel of produced oil—remained low at 0.3 m/bbl of gas, it said.

The worldwide flaring growth last year was equivalent to the total annual gas consumption in Central and South American countries, the GGFR reported.

It noted that in the US, flaring climbed 48% year-to-year as crude production rose 33%. “Satellite data indicate that increased flare volumes were concentrated almost exclusively in the shale oil basins in the Bakken in North Dakota and the Permian and Eagle Ford in Texas,” the GGFR said. “These areas saw rapid development in 2018, with shale oil production increasing by around 29% in the Bakken, 40% in the Permian, and 15% in the Eagle Ford.”

Countries struggling with conflict also experienced a gas flaring increase from 2017 levels, the GGFR said. “In Venezuela, gas flaring soared even as oil production declined sharply, indicating a state in crisis, similar to trends seen previously in Syria and Yemen,” it noted.

In Angola, gas flaring declined by 27% year-to-year during 2018. Associated gas that likely would have been flared was exported instead through an LNG plant, representing a positive development for the country’s strategy to reduce gas flaring, the GGFR said. In Syria, gas flaring fell by 42% from 2017 levels, suggesting restoration of more normal oil field operations following a sustained period of conflict, it said.

The GGFR is composed of governments, oil companies, and international institutions. The US National Oceanic and Atmospheric Administration and GGFR have developed the flaring estimates in cooperation with the Colorado School of Mines based on observations from advanced sensors in a satellite launched in 2012.

http://www.worldbank.org/en/programs/gasflaringreduction

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