BackNatural gas demand will grow fastest over next two decades: BP
Half the increased demand will be met by rising conventional gas production, primarily in Russia and the Middle East, and about a half from shale gas
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Mumbai: Demand for liquefied natural gas (LNG) will grow fastest among all fossil fuels for another 20 years despite short-term turbulence, UK’s biggest energy firm BP Plc predicted, at a time spot prices have fallen well below the $10 per million metric British thermal units (mmBtu) due to excess supply and low crude prices.
“Demand for natural gas will grow fastest of the fossil fuels over the period to 2035, increasing by 1.9% a year, led by demand from Asia. Half the increased demand will be met by rising conventional gas production, primarily in Russia and the Middle East, and about a half from shale gas. By 2035, North America, which currently accounts for almost all global shale gas supply, will still produce around three quarters of the total," said the BP Energy Outlook 2035 released on 17 February.
Platts, a global energy information provider, which indicates prices for cargoes scheduled for delivery a month later, said prices of spot LNG for March delivery to northeast Asia saw their largest year-over-year drop on record, plunging 61.7% from March 2014 to average $7.436 per mmBtu.
This is the largest year-over-year fall since Platts began assessing the benchmark Japan Korea LNG Marker price in February 2009. Platts said barely a year ago, prices had reached a historic high of $20.20 per mmBtu.
This was largely due to moderate temperatures and high buyer inventories continued to cap demand for spot cargoes in northeast Asia, despite the lower prices in March, said Stephanie Wilson, managing editor of Asia LNG at Platts.
“Exacerbating the oversupply were cheaper competing fuels, which many utility power generators opted to burn rather than LNG," she said.
BP in its outlook said that despite these short-term trends which have kept the prices at a low, especially crude aided by an increased supply of tight oil (shale oil) in North America (Canada and the US), the long term growth of both LNG, crude oil and coal is still intact and it sees an increasing demand from Asian countries such as India and China.
In fact, the report said, until 2035, India’s oil requirements will continue to grow rapidly, with imports accounting for almost 90% of its total oil demand by 2035. Currently, India imports almost 80% of its oil demand, according to Petroleum Planning and Analysis Cell.
In terms of crude oil demand, India will be the second largest contributor, growing by more than 4 million barrels per day (bpd). It will be surpassed by only China whose demand will grow to 18 million bpd by 2035 while the US, currently the fastest growing, will shrink by a million bpd to 17 million bpd by 2035.
However, like last year, the report said coal will continue to be the dominant fuel of India with the country increasing its coal consumption by 360 million tonnes of oil equivalent by 2035, making it the second largest growth market.
Bob Dudley, chairman of BP, said that in the global energy market, there are three main telling signs of the way forward that define the growth of energy.
“First, trade patterns are shifting. The strong growth of US tight oil in recent years has had a dramatic impact, with oil increasingly flowing from West to East rather than East to West," he said.
He further said that the second thing to note is that the change in energy mix. “Renewables and unconventional fossil fuels will take a larger share, along with gas, which is set to be the fastest growing fossil fuel, as well as the cleanest, meeting as much of the increase in demand as coal and oil combined," he pointed out in a note released by BP along with the outlook.
Thirdly, he said, the unfolding environmental challenge will grow in proportions and will continue to be a major concern.
However, the outlook also had a word of caution for the two fastest growing economies.
“The future growth paths of China and India represent a major source of uncertainty. Our low GDP case assumes China and India grow at an average rate of 4% p.a. over the projection period, compared with 5.5% p.a. in the base case. It also includes the trade and other spill-over effects of lower growth in these two countries on the rest of the world," the annual outlook noted.
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