BAKU, Azerbaijan, Dec.11
By Leman Zeynalova – Trend:
Domestic European gas production will continue its decline as legacy fields mature, Trend reports with reference to Wood Mackenzie.
“Some of the higher-cost projects will struggle to deliver value and will not materialize. Europe will largely be dependent on imports – mostly on LNG and Russian piped gas.
As one of the cheapest sources of supply, Russia will be positioned to take a dominant share in the European market. However, the region’s competition policy and diversification efforts will likely limit Russian market share to under 40 percent.
Lower indigenous production and limited Russian imports will provide headroom for LNG imports in Europe, despite substantially lower gas demand,” the company believes.
Wood Mackenzie forecasts that as gas demand declines, there will still be a need for new LNG projects.
“But the space for new developments will be limited to only about 145 bcma in 2040, compared to 450 bcma in our base case. New projects will still be needed by 2030. Low-cost LNG suppliers Russia and Qatar will be front-runners to fill this gap, and low Henry Hub prices will help the competitiveness of US LNG.
But the long-term viability of new investments will be questionable as Qatar and Russia further expand their LNG presence and demand starts declining post-2035. US LNG underutilisation may be required to balance the market in the long run, similarly to 2020,” reads the analysis released by Wood Mackenzie.
The company analysts expect that gas prices will remain suppressed, leaving large gas resources stranded.
“In an AET-2 world, our Global Gas Model shows spot prices in Asia never recover above US$7/mmbtu, while European prices remain below US$5/mmbtu for most of the outlook.
Compared to our base case, that scenario would leave about 12 trillion cubic metres of discovered gas resources stranded: more than three times the amount of gas produced globally in 2020.
Most of this would be in the US, Russia and the Middle East, not only because of the decreasing export opportunities for their vast gas resources, but also because of the lower domestic demand for gas in those regions.
Many pre-FID projects will not materialize. Developers will face tough choices. And industry players will need to do much more to decarbonize natural gas and contribute to achieving carbon-neutral energy systems,” said the company.
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