Sparks About Gas

Global gas trade shifts

 By Amanda Saint
About gas

The International Energy Agency (IEA) predicts that the natural gas market’s traditional trade routes are set to change course completely due to oversupply, which is being fueled by increased production and falling demand…

In June 2016 the IEA released its 2016 Medium-Term Gas Market Report showing what it believes the world can expect to happen in the liquid natural gas (LNG) market over the next five years. According to the IEA, supply and demand developments are showing that new LNG supplies are coming online as growth in some major markets slows, which will lead to major shifts in global gas trade patterns.

While production and export capacity in the United States and Australia is ramping up, Japan and Korea—which together account for almost half of global LNG trade—are seeking to import less. Elsewhere in Asia, abundant LNG supplies are expected to make gas seem like a good long-term strategic option, but the IEA says that growing demand in developing Asian countries alone will not be sufficient to bring LNG markets back into balance in the near future. Previously, Europe has been the last resort buyer of “unwanted” LNG supplies but it is not expected to save the day this time due to low coal prices powering the continent.

Last year, the IEA predicted that global demand for LNG would rise by 2 percent a year by the end of the forecast period, but this has now dropped to an expected 1.5 percent rise per year. So what does this mean for LNG buyers and sellers?

Production and export capacity in the United States and Australia is ramping up

The report says that the increase in LNG available combined with the diversification of supply sources will bring major supply security benefits to end-consumers. But that complacency should not set in as threats to gas supply security remain substantial—recent history has shown that threats to the security of supply come along unexpectedly, in the form of natural disasters, adverse weather, political instability and technical failures. The IEA says that these risks could potentially become even worse over the next five years with the downturn in oil and gas prices seeing producers slash investments and refocus on making cost reductions.

An increasingly interconnected world also means that demand and supply shocks that used to hit just one region could spread further afield into other regions as well. All of these factors, which are happening within a rapidly evolving wider energy landscape, mean that the IEA has called for the development of a new, broader approach to gas security as soon as possible.

SEE MORE: The rise of natural gas by Peter Ward

about the author
Amanda Saint
Journalist and content writer, specialised in engineering and technology with a focus on environmental sustainability, urbanisation and biotechnology.