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CEDIGAZ, the International Association for Natural Gas

Medium and Long Term Natural Gas Outlook 2017

CEDIGAZ, July 2017

SUMMARY

CEDIGAZ Reference Scenario: Main assumptions

Medium and Long Term Natural Gas Outlook 2017 2

Policy

• No 2°C target but INDCs are assumed to be achieved.

• Cedigaz Scenario brings about a trajectory of CO2 emissions from the energy sector that is consistent with INDCs.

• Only current policies and announced national energy plans are considered, although some elements of strategic energy plans are viewed with caution and not fully integrated.

• CEDIGAZ Scenario incorporates Europe’s 2030 Climate & Energy Package (40-27-27).

• As regards geopolitics, local conflicts have less negative influence on global energy markets in the long term.

Economy/demographics/pricing

• World economic growth of 3.5%/year over 2014-2035. Strong economic growth in the Middle East, Africa and India.

• Population growth of 0.9%/year (slight decrease in Russia and Japan, but high growths in Africa, the Middle East and India).

• Henry Hub price as a growing component for gas pricing in the long term.

• Globalization of gas markets via a strong expansion of the LNG trade (flexible LNG).

• Oil prices are expected to increase in the long term to reach $90/bbl by 2035.

• High CO2 price post-2020 (Europe, China).

Technology

• CEDIGAZ Scenario only considers technologies that are already in use at the current time or those that have been approved.

• Increasing technological progress, cost reductions of low-carbon technologies and continued improvements in energy efficiency.

• Policy initiatives stimulating the deployment of renewables.

• World energy intensity reduced by 40% over 2014-2035, with the largest decrease posted in China (-4%/year).

• Absence of any significant technological revolutions or breakthroughs. Decarbonisation is mostly occurring in the power sector.

� In order to frame its gas demand and supply prospects within a wider energy environment, CEDIGAZ has

made projections on global primary energy demand, which are based on assumptions on the evolution of

the world economy, population, policies and technology.

CEDIGAZ Reference Scenario: Main trends (2014 – 2035)

3

� China remains the largest growth market for energy but is overtaken by India at the end of the period.

� No energy demand growth in OECD Asia and a significant reduction in energy consumption in Europe.

� Virtually all the growth in world energy demand comes from fast-growing emerging economies.

� Emerging economies account for around 85% of gas demand growth.

� The main demand driver in these countries will be economic development.

%/year


-5

-3

-1

1

3

5

7

EU28 United

States

OECD Asia China India Other non-

OECD Asia

Middle East CIS Africa South &

Central

America

Energy intensity

Real GDP

Population

Energy demand

Natural gas demand

Prospects for energy consumption by

geographic zone and the role of natural gas

4

Unit: Mtoe


0

500

1000

1500

2000

2500

3000

3500

4000 Other fuels - 2035 Other fuels - 2014

Natural gas - 2035 Natural gas - 2014

0 1000 2000 3000 4000 5000

Oil

Gas

Coal

Bioenergy

Nuclear

Other renewables

Hydro

2014

Growth in 2014-2035

Prospects for the global energy mix

29%

31%

21%

5%

3%

10% 1%

Coal

Oil

Gas

Nuclear

Hydro

Bioenergy

Other renewables

24%

27%24%

6%

3%

11%5%

5

2014: 13.7 Gtoe 2035: 16.7 Gtoe

Renewables and natural gas are gaining share relative to coal and oil.


Prospects for energy balance by region

6

Unit: Mtoe

Coal

Oil

Gas

Nuclear

Hydro

Bioenergy

Other REN

Growth 2014-2035

Energy: + 1%/year

Gas: + 1.6%/year


0

500

1000

1500

2000

2500

3000

2014 2035

0

500

1000

2014 2035

0

500

1000

1500

2000

2014 2035

0

500

1000

1500

2014 2035

0

500

1000

1500

2014 2035

0

1000

2000

3000

4000

5000

6000

7000

8000

2014 2035

0

500

1000

2014 2035

Natural gas gains importance in the energy mix in most of markets

Natural gas demand prospects by region

7

Unit: Bcm


-20

180

380

580

780

980

1180

1380

2015 Growth 2015-2025 Growth 2025-20352015

Asia-

Oceania

19%

North

America

27%Middle

East

14%

CIS

17%

Europe

14%

South &

Central

America

5%

Africa

4%

Asia-

Oceania

26%

North

America

23%Middle

East

16%

CIS

14%

Europe

10%

South &

Central

America

6%

Africa

5%

2035

Natural gas production prospects by region

8

Bcm

North

America

26%

CIS

21%Middle East

19%

Asia-Oceania

17%

Africa

8%

South &

Central

America

5%

Europe

4%

2015

2035


0

200

400

600

800

1 000

1 200

2015 2025 2035

North America

27%

CIS

23%Middle East

17%

Asia-Oceania

15%

Africa

6%

South &

Central

America

5%

Europe

7%

Unconventional natural gas prospects


� The share of unconventional gas in total supply is expected to grow from 20% in 2014 to 33% in 2035.

Global production

� Unconventional gas provides 71% of supply growth, rising from 699 bcm in 2014 to 1587 bcm in 2035.

Bcm

� The bulk of projected unconventional gas production is in the form of shale gas.

Conventional

67%

Coal-to-Gas &

Biogas

1% CBM

4% Tight Gas

8%

North

America

16%

Asia-Oceania

2%

Other

2%

Shale gas

20%

Total 2035 = 4747 bcm

0%

5%

10%

15%

20%

25%

30%

35%

0

1000

2000

3000

4000

5000

2015 2025 2035

Conventional Coal-to-Gas & Biogas

Shale gas CBMTight Gas Methane hydrates

Share of unconventional (%)

Interregional flows by pipeline and LNG

2015 = 444 Bcm

2035 = 836 Bcm

Growth 2015-2035 World gas supply: + 1.5 %/year

Long-distance LNG trade: + 4.4%/year

Long-distance pipeline trade: + 2.1 %/year

Strategic role of LNG to meet growing external import needs of

Europe and Asia

10Medium and Long Term Natural Gas Outlook 2017

Pipeline

56%

LNG

44%

Pipeline

45%

LNG

55%

Prospects for the international LNG market


Delays in the second wave of LNG supply bring a risk of tighter markets in the 2020s.

LNG Supply Demand Gap

0

100

200

300

400

500

600

20

15

20

16

20

17

20

18

20

19

20

20

20

21

20

22

20

23

20

24

20

25

20

26

20

27

20

28

20

29

20

30

20

31

20

32

20

33

20

34

20

35

mm

tpa

North America

Middle East

South & Central America

Europe

C.I.S.

Asia/Oceania

Africa

World LNG Demand

Operational & under

construction capacities

Required additional

capacity

Prospects for global CO2 emissions


Comparison of scenarios in terms of CO2 emissions

� In CEDIGAZ Scenario, the growth of global emissions declines more strongly compared to other baseline

scenarios, but emissions remain well above the 2°C path despite the deployment of renewables and

efficiency, as well as coal to gas switching.

%/year

-2,5

-2

-1,5

-1

-0,5

0

0,5

1

1,5

CEDIGAZ

(2014-2035)

BP

(2015-2035)

IEA New Policies

(2014-2040)

ExxonMobil

(2015-2040)

IEA 450

(2014-2040)

Energy demand

Energy-related CO2 emssions

CONCLUSION


� Natural gas will actively expand its position in the global energy markets by 2035.

� Natural gas demand will pursue its short and medium-term growth trajectory to 2035 (+ 1.5%/year).

� The strong expansion of LNG supply will help gas to grow faster than oil and coal.

� The growing importance of LNG trade will accelerate the integration of natural gas markets and will

result in a closer linkage between international prices.

� The growth of natural gas will be backed by the abundance of economic conventional and

unconventional gas resources.

� Global peak demand for gas is not expected in the foreseeable future.

� Along with efficiency measures, the substitution from coal and oil to gas and renewables in a more

powered energy system is key to meet environmental challenges.

� Most countries have policies that should favor gas consumption over other hydrocarbon sources,

especially for the power sector.

� Even so, strong action is required in the short and medium term to promote coal-to-gas switching.

� The environmental advantages and flexibility of gas makes it a valuable component of a gradually

decarbonising energy and electricity system.

CEDIGAZ Publication

« Medium and Long Term Natural Gas Outlook 2017 »

is available online:

http://www.cedigaz.org/members/gas-market-analysis.aspx

1 & 4 Avenue de Bois-Préau

92852 Rueil-Malmaison Cedex

France

www.cedigaz.org

About CEDIGAZ

CEDIGAZ is an international association with around 80 members in 40 countries. Dedicated to natural gas

information, CEDIGAZ collects and analyses economic information on natural gas, LNG and unconventional gas in

an exhaustive and critical way. CEDIGAZ data has been the industry's reference since its foundation in 1961.

CEDIGAZ

CEDIGAZ, the International Association for Natural Gas

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