IEA Cuts Gas Use Growth Forecast as Coal to Renewables Gain

Jun 10, 2014 10:24 am ET

(Updates with shale gas in 12th paragraph.)

June 10 (Bloomberg) -- Global natural gas demand will increase at a slower rate than previously expected through 2019 amid weaker economic growth and competition from coal and renewables, according to the International Energy Agency.

Gas use will climb by 2.2 percent annually through 2019 from 2013 after last year posting the slowest growth among fossil fuels, the Paris-based International Energy Agency said today in its medium-term gas market report. Consumption will be driven by non-developed countries, which will see their market share rise to 57 percent of the total from parity in 2007.

“Slower economic growth, the ever-strong competition from both coal and renewable energies, together with high gas prices, are all slowing down the growth of natural gas across all sectors,” the IEA said. “The maturity of most markets, slower economic growth, and competition from renewable energies or coal” will damp demand from developed nations, it said.

Nations outside the 34-member Organization for Economic Cooperation and Development will provide 85 percent of additional gas demand, led by China, where usage will rise 11 percent a year to 2019, according to the report. Europe and the former Soviet Union will see zero growth in the period.

Global consumption of gas increased 1.2 percent last year to 3.49 trillion cubic meters (123 trillion cubic feet) as oil use grew 1.4 percent, coal demand 3 to 4 percent and renewable power generation more than 4 percent, according to the IEA. Europe’s push for green power and lower coal prices led to a loss of almost 40 billion cubic meters of gas in power generation alone over the past three years, the IEA said.

Power Demand

“As the European case has shown, lower power demand, the stronger than expected growth of one type of energy and high gas prices can easily send gas demand in the doldrums for an extended period of time,” it said.

Usage will reach 3.98 trillion cubic meters a year in 2019, a 2 percent downward revision from last year’s edition of the report, according to the IEA. Consumption will fall in the residential and commercial sectors, while demand from the power sector is set to increase, initially in North America and eventually in Europe, the IEA said.

“The current very low levels are starting to test the limits of the whole power system, and the decommissioning of coal-fired plants in the U.K. will help the return of gas use in the power sector,” the IEA said.

Road Transport

While there will be some improvement from European power generation, gas won’t become the preferred fuel in the sector as renewables are expected to climb by about 260 terawatt-hours in OECD Europe, according to estimates to be released in the medium-term renewable energy market report in August, the IEA said. Gas-fired plants will generate 673 terawatt-hours by 2019.

“In particular, generation from wind continues to increase strongly,” the IEA said. “Against this backdrop, renewable energies generate more additional power than the additional generation needed. If not for a declining nuclear output, combustible fuels (gas, coal and oil) would face an absolute decline, but the drop in nuclear actually compensates for the surplus of renewable sources.”

Use of gas in road transport, especially in the U.S. and China, will double to 93 billion cubic meters in 2019 from 2013, accounting for 10 percent of incremental global demand, the IEA said. Gas will increase its share in the transport sector at the expense of oil over the next few years, accounting for about 3.4 percent in 2019 from about 1.8 percent in 2013.

Gas Supply

Global gas supply will rise 2.3 percent a year from 2013, reaching 3.98 trillion cubic meters by 2019, after climbing 1.1 percent in 2013, the IEA said. OECD nations in North and South America, Asia and Oceania will provide additional volumes, while unconventional and traditional gas developments in China will boost the country’s output by 65 percent to 193 billion cubic meters by 2019. Outside China and Australia, and potentially Argentina and Mexico, unconventional output will be “modest,” the IEA said.

“Despite some hopes, shale gas in the U.K. or in Poland will not reverse the trend because it will account for only a couple of billion cubic metres,” the IEA said.

The Netherlands will probably become a net importer by the next decade, as Europe’s own production declines by 25 billion cubic meters over 2013-2019. Russia, the world’s second-biggest producer after the U.S., will have flat production over the period. After a collapse in 2013, Africa’s production should recover to 254 billion cubic meters by 2019.