LNG 101 week seven: Role of LNG in world energy supply

International Energy Outlook 2013 projects that world energy consumption will grow by 56 percent between 2010 and 2040. Much of the growth in energy consumption is projected to occur in countries outside the Organization for Economic Cooperation and Develop­ment known as non-OECD.

In these non-OECD countries, demand is driven by strong, long-term economic growth, and is expected to increase by 90 percent. In OECD coun­tries, the increase is predicted to be 17 percent. China accounts for the largest share of the growth in global energy use, with its demand rising 60 percent by 2035, followed by India — where de­mand doubles.

A recent headline in Reuters pro­claimed “India’s future lies in liquefied natural gas.” Imports of LNG by India “will soar in the next decade to fuel an expanding economy; pitting India against China and Japan for supplies as its domestic gas output struggles and overland delivery remains a dream.”

India’s trillion-dollar economy is already one of world’s largest import­ers of LNG.

The rapid increase in LNG demand from Japan will limit the ability of emerg­ing markets such as India to obtain LNG at an affordable price. The extra sup­plies that India needs are more likely to come from Qatar and Australia. Qa­tar already supplies India on long-term contracts. According to a 2012 study done by Wood Mackenzie Ltd., China may need to boost imports of liquefied natural gas by about 80 percent from current contracted volumes to meet their demand for the fuel.


The world’s biggest energy user may need to purchase an additional 37 mil­lion metric tons of LNG by 2030 on top of current contracted volumes of 46 mil­lion metric tons. Imports of LNG by China rose 34 percent from 2011 to 2012.

Two years after the Fukushima earthquake, Japan’s energy market remains in transition. As the world’s biggest LNG consumer, this has global implications for the LNG market.

Only 5 percent of Japan’s nuclear capacity is operational as of January 2013. Power generators have switched to alternative fuels, most notably natu­ral gas. This has intensified global com­petition for LNG, led to cargo diversions from other markets and contributed to rising prices for flexible LNG.

So it’s no surprise that fossil fuels are projected to supply almost 80 per­cent of world energy use through 2040. Natural gas is the fastest-growing fossil fuel in the outlook. Global natural gas consumption is expected to increase by almost 2 percent per year.

According to the Energy Informa­tion Administration, or EIA, “large‐scale investment in energy‐supply infrastruc­ture is required to replace existing supply capacity and expand to meet growing energy needs. Some industry analysts believe that a cumulative in­vestment of $37 trillion is needed in the world’s energy supply system between 2012‐2035. Of that total, non‐OECD coun­tries require 61 percent. Oil and gas supply are predicted to account for $19 trillion of the total.”

In our second issue on LNG we asked the question, “why is there a global demand for LNG?” The answer is simple. The world needs more energy and wants clean energy, safe energy and affordable energy.

The global population is predicted to rise from 7 billion to 9 billion in 2050 and the world will obviously need more energy. LNG is a safe, clean, and efficient energy source and is already part of the global energy mix.

This expanded role of LNG in the world energy supply will also have signif­icant impact on the American economy.

On Friday, Nov. 15, American Petroleum Institute Director of Up­stream and Industry Operations Erik Milito highlighted the authorization by the Department of Energy, or DOE, for exports from the Quintana Island, Texas, LNG facility and urged the agency to quickly process the re­maining 21 applications.

According to Milito, “LNG exports will significantly reduce our trade defi­cit, grow the economy, and support thousands of U.S. jobs. The DOE has ev­ery reason to quickly approve these ap­plications, and we’re pleased that they seem to be moving ahead.”

The demand for LNG from China, India and Japan is growing rapidly and the number of potential suppliers is also increasing.

In our next issue, we’ll look at the details of buyers and sellers in the glob­al LNG market.

This is the seventh in a 10-part series produced by the Alaska Support Industry Alliance to educate the public about liquefied natural gas.

Author: Ann Northcutt

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