IEA says global gas demand could rise more than 50% by 2035
London (Platts)--29May2012/559 am EDT/959 GMT
World demand for natural gas could rise more than 50% by 2035, from
2010, the International Energy Agency said Tuesday, but only if a significant
portion of the vast global resources of shale gas, tight gas and coalbed
methane can be developed profitably and in an environmentally acceptable way.
The IEA said the surge in North American production of unconventional
gas, thanks to technology advances, held out the prospect of further output
increases in the US and Canada and "the emergence of a large-scale
unconventional gas industry in other parts of the world, where sizeable
resources are known to exist."
This would help bring about greater energy diversity and boost energy
security and would also result in global benefits in the form of reduced
energy costs, the IEA said in a special report, Golden Rules for a Golden Age
Gas could take a 25% share of the global energy mix by 2035, overtaking
coal to become the second largest primary energy source after oil, in the
IEA's most positive scenario for unconventional gas.
Article continues below...
The agency is advocating that policymakers and the industry adopt a set
of "golden rules" which take into account a range of social and environmental
"The golden rules underline that full transparency, measuring and
monitoring of environmental impacts and engagement with local communities are
critical to addressing public concerns," it said.
The agency recommends careful choice of drilling sites, thorough well
design and integrity testing, and monitoring of waste water, among other
In this "golden rules" scenario production of unconventional gas --
mainly shale -- more than triples to 1.6 trillion cubic meters in 2035,
accounting for nearly two-thirds of incremental gas supply over the
The share of unconventional gas in current total gas output is 14% but
this will rise to 32% in 2035, with most of the increase coming after 2020,
"reflecting the time needed for new producing countries to establish a
commercial industry," the agency said.
During the period to 2035, the US will overtake Russia as the world's
biggest producer of natural gas, the IEA said. China will also be among the
top producers because its big unconventional resource base will allow very
rapid growth in unconventional production, starting around 2020.
The IEA also sees big increases in Australia, India, Canada and
Indonesia, and forecasts that production of unconventional gas in the
European Union, led by Poland, will be sufficient after 2020 to offset
continued decline in conventional output.
The investment needed to develop these global resources of
unconventional gas will be sizable, and "constitutes 40% of the $6.9 trillion
(in year-2010 dollars) required for cumulative upstream gas investment in the
golden rules case," the agency said.
THREAT TO GROWTH
But the IEA warned that if the industry is not careful to develop in an
acceptable way, its growth could be restricted. In the IEA's "low
unconventional" case a lack of public acceptance means that unconventional
gas production rises only slightly above current levels by 2035.
Lower availability of gas in this scenario results in higher prices, and
the share of gas in the global energy mix increases only slightly, from 21%
in 2010 to 22% in 2035, remaining behind coal, and behind the 25% of the
golden rules case.
This low unconventional scenario also sees different trade patterns,
with North America "requiring significant quantities of imported LNG." The
IEA said it estimated that transparent, acceptable development of
unconventional gas would add only around 7% to the overall cost of a typical
shale gas well, and possibly less for a larger project with multiple wells.
That extra cost could be an affordable increase for developers to pay if
it brings them a wider market overall.
Currently in the US, where the shale gas industry is most developed,
front-month gas prices are only around $2.60/MMBtu, and look very competitive
against gas elsewhere in the world, where shale gas remains undeveloped.
Platts spot European gas prices are around $9/MMBtu and spot Asian LNG,
measured by the Japan Korea Marker, around $18/MMBtu.
US gas also looks cheap compared with oil, equating to a price of around
$15/b against oil prices of around $110/b.
Some opponents of shale gas have argued that it should not be developed
because greater use of gas could increase global emissions. The IEA said,
however, that energy related CO2 emissions would be 1.3% higher in 2035 in
its low unconventional case than in its golden rules case.
But it said, "greater reliance on gas alone" could not achieve the
international goal of limiting the global average temperature increase to 2
degrees Celsius above pre-industrial levels.
--Margaret McQuaile, email@example.com
--Alex Froley, firstname.lastname@example.org