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Energy Insights Outlook Overview

Global Gas & LNG Outlook to 2035

How will the global liquefied natural gas (LNG) market balance?

Our Global Gas & LNG Outlook is informed by detailed market research and continuous tracking of market developments as well as deep on-the-ground expertise across the globe. We forecast gas demand at a regional level and then use our infrastructure and contract outlooks to forecast supply and demand balances, corresponding gas flows, and pricing implications to 2035.
The outlook is powered by our Global Gas Model, which is updated biannually. The model’s key inputs can be tailored to deliver a custom forecast or market analysis, allowing you to answer any “what if” questions, based on your organization’s specific need.

Five key findings

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Executive Summary

Throughout 2018, increased liquefied natural gas flows from the United States and Australia impacted global gas dynamics while pipeline flows remained stable. On the demand side, Asia continued to dominate LNG import demand in the first half of 2018, with overall volumes increasing at least 12 percent year over year. In China alone, LNG import volumes grew 52 percent per annum during the first half of the year. For supply, new LNG projects are expected to add 48 billion cubic meters per annum of capacity, and LNG plant utilization has held stable at around 82 percent.

We also saw rallying oil and gas prices with the exception of Henry Hub. As a result, the spread between Asian spot LNG and Asia-landed Henry Hub prices widened to about $3.7 per million British thermal units in February. And while traded volumes in financial spot LNG products have increased, a relatively low churn rate indicates that liquidity is still lagging other leading gas indices.

Medium-term gas-market outlook

Based on our analysis of global gas balances, we expect to see natural gas demand and supply grow by a 1.6 percent compound annual growth rate from 2017–22, with around 50 percent of this demand growth coming from Asia and very strong supply growth from unconventional production. Looking at the way gas is delivered around the world, gas consumed where produced should continue to dominate the gas mix (at about 70–75 percent), while the share of traded gas should grow from 25 percent to 28 percent by 2022.

New gas infrastructure is expected to support the rise in traded gas flows, with new pipelines adding about 200 billion cubic meters per annum of cross-border capacity by 2022. We expect that the largest import increases will occur in China, South Asia, and Europe.

China’s rapid demand growth is expected to quickly exceed its domestic supply growth, leading to a significant increase in LNG and pipeline imports. In South Asia, the gap between declining domestic supply and modest growth in demand is expected to widen to around 20 billion cubic meters by 2022, with LNG imports from Qatar and the United States expected to bridge that gap. Europe is likely to face a similar situation, with an approximately 45-billion-cubic-meters gap developing between declining supply and a flat demand-growth profile. As a result, we expect Europe to increase imports in pipeline gas and LNG, predominantly from existing suppliers.

Top four themes relevant for stakeholders in the gas value chain

In our outlook to 2035, we have identified four major themes that stakeholders in the gas world should focus on to remain successful. First, the traditional midstream model has come under pressure from players expanding margins through trading and taking more integrated positions across the value chain. Second, transparent LNG pricing from the US has created unprecedented arbitration opportunities, with $20–35 billion at stake through negotiation and arbitration. Third, we expect the gas-for-transport sector to provide limited upside potential even under optimistic assumptions. And finally, to secure positive margins, new LNG liquefaction projects need to be competitive against US projects at $7 per million British thermal units landed cost in Asia.

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