Which factors to offset gas price growth in 2018?
Baku, Azerbaijan, Dec.29
By Leman Zeynalova – Trend:
Natural gas market is expected to rebalance within two or three years, and will exhibit a slow but steady upward price trend for all regional markets from 2020 to 2025, according to Global Gas Outlook of the Gas Exporting Countries’ Forum (GECF).
"After the sharp fall in 2014-2015, natural gas prices rebounded and have been growing strongly for the last two years, with the growth rate from January to October 2017 totaling 25 percent across the main global markets. This is compounded by three factors: coal to gas switching in the US, the UK, China and India ahead of schedule; stabilization and subsequent rebound in oil prices in 2016-2017; and proactive greenhouse gas mitigation policies in European countries that drove up gas-fired electricity demand," said the report.
In 2017-2018, part of this growth is expected to be offset by the following factors: new LNG capacities coming online (up to 65 MTPA globally); a decrease in Japanese demand after a partial restart of nuclear capacities; correction of energy demand imbalances in China; and indigenous production growth in several niche markets, GECF analysts believe.
While the liquefied natural gas (LNG) market remains under pressure from projects that were planned when oil prices were twice as high, it has been announced that a significant portion of those projects on stages before final investment decision will be cancelled or postponed indefinitely, said the report.
"Consequently, in the medium-term, new US LNG projects are unlikely to fulfill both the US and global demand growth. In the near future, supply from projects with a higher cost base than that of the US will be required, including indigenous production and greenfield projects in Russia, East Africa and Australia. This supports our projection that the natural gas market is expected to rebalance within two or three years, and will exhibit a slow but steady upward price trend for all regional markets from 2020 to 2025," said GECF.
For the long-term, increased pressure from global energy transitions and power mix substitutions, along with the increasing long-run marginal cost of new projects, are expected to significantly drive up prices in every region except Latin America, according to GECF.
"Given current trends, Latin America is expected to experience growth in indigenous natural gas production and to take more US LNG supplies," said the report.
Follow the author on Twitter: @Lyaman_Zeyn