Baku, Azerbaijan, Nov.14
By Leman Zeynalova – Trend:
Gas price formation will be based increasingly on competition between various sources of gas, rather than indexation to oil by 2040, according to the World Energy Outlook, released by the International Energy Agency (IEA).
“Natural gas grows to account for a quarter of global energy demand in the New Policies Scenario by 2040, becoming the second-largest fuel in the global mix after oil. But 80 percent of the projected growth in gas demand takes place in developing economies, led by China, India and other countries in Asia, where much of the gas needs to be imported (and so transportation costs are significant) and infrastructure is often not yet in place,” said the report.
But according to the IEA experts, the competitive landscape is formidable, not just due to coal but also to renewables, which in some countries become a cheaper form of new power generation than gas by the mid-2020s, pushing gas-fired plants towards a balancing rather than a baseload role.
“Efficiency policies also play a part in constraining gas use: while the electricity generated from gas grows by more than half to 2040, related gas use rises by only one-third, due to more reliance on highly efficient plants,” said the report.
IEA expects that a new gas order will emerge, with US LNG helping to accelerate a shift towards a more flexible, liquid, global market.
“LNG accounts for almost 90 percent of the projected growth in long-distance gas trade to 2040: with few exceptions, most notably the route that opens up between Russia and China, major new pipelines struggle in a world that prizes the optionality of LNG. Price formation is based increasingly on competition between various sources of gas, rather than indexation to oil. US LNG acts as a catalyst for many of the anticipated changes in the wider gas market,” said the report.
In the Sustainable Development Scenario, consumption of natural gas rises by nearly 20 percent to 2030 in the Sustainable Development Scenario and remains broadly at this level to 2040. The contribution of gas varies widely across regions, between sectors and over time in this scenario.
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