Gas 2017

Marke t Report Series
gas 2O17
Analysis and Forecasts to 2O22
GAS 2O17
INTERNATIONAL ENERGY AGENCY
The International Energy Agency (IEA), an autonomous agency, was established in November 1974.
Its primary mandate was – and is – two-fold: to promote energy security amongst its member
countries through collective response to physical disruptions in oil supply, and provide authoritative
research and analysis on ways to ensure reliable, affordable and clean energy for its 29 member
countries and beyond. The IEA carries out a comprehensive programme of energy co-operation among
its member countries, each of which is obliged to hold oil stocks equivalent to 90 days of its net imports.
The Agency’s aims include the following objectives:
n Secure member countries’ access to reliable and ample supplies of all forms of energy; in particular,
through maintaining effective emergency response capabilities in case of oil supply disruptions.
n Promote sustainable energy policies that spur economic growth and environmental protection
in a global context – particularly in terms of reducing greenhouse-gas emissions that contribute
to climate change.
n Improve transparency of international markets through collection and analysis of
energy data.
n Support global collaboration on energy technology to secure future energy supplies
and mitigate their environmental impact, including through improved energy
efficiency and development and deployment of low-carbon technologies.
n Find solutions to global energy challenges through engagement and
dialogue with non-member countries, industry, international
organisations and other stakeholders.
IEA member countries:
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Estonia
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France
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Secure
Greece
Sustainable
Hungary Together
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Korea
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Netherlands
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International Energy Agency Sweden
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available online at www.iea.org/t&c/ the work of the IEA.
F OREWO RD
FOREWORD
The natural gas market continues to evolve rapidly since last year’s Medium-Term Gas Market
Report. The shale revolution shows no sign of running out of steam, and its effects are now being
amplified by a second revolution, caused this time by rising supplies of liquefied natural gas (LNG).
The United States is in the frontline of both of these revolutions, and the disruption to traditional gas
business and pricing models will continue to have profound impacts on gas markets over the next
five years.
This year, our renamed market report, Gas 2017, looks at this LNG-driven transformation in detail.
New liquefaction capacity, mostly from the United States and Australia, is coming online at a time
when the LNG market is already well supplied. This LNG glut is already affecting price formation and
contracts, and attracting new customers. The list of LNG-consuming countries has ballooned to 39
this year from just 15 as recently as 2005, with the newcomers including Pakistan, Thailand and
Jordan. The list of LNG importers is expected to grow longer in the next five years as many countries
are ready to benefit from today’s low LNG prices. A key question for the gas industry is whether
today’s opportunistic buyers can be turned into long-term consumers.
Gas demand continues to increase at a steady clip, but, over the next five years, the power sector will
no longer be the main source of growth worldwide. Instead, it is industrial consumers that will take
up much of the slack in the market, with the People’s Republic of China (hereafter, “China”), the rest
of developing Asia, the Middle East and the United States leading the way. The power sector remains
the largest consumer of gas, but growth opportunities are being squeezed by the deployment of
newer, more efficient gas-fired power plants, the continued expansion of renewable generation and
competition from coal.
Asia is not the only region proving more receptive to natural gas. Market reforms in Egypt, Brazil and
Argentina have the potential to unlock major new domestic resources by bringing in the necessary
technologies and capital. Mexico, soon to be a member of the International Energy Agency (IEA), has
made very ambitious reforms to its energy system, with gas playing an instrumental role in reducing
the share of expensive oil-fired generation in the mix thereby bringing economic and environmental
benefits.
The environmental advantages of natural gas, particularly when replacing coal, deserve more
attention from policy makers. In China, this substitution is a key strategy for improving urban air
quality. In the United States, where natural gas has a cost advantage over coal in power generation,
there have been dramatic reductions in carbon dioxide emissions from the power sector. In the last
year, the United Kingdom has demonstrated how a more robust carbon-pricing regime can lead to a
rapid reduction in power-sector emissions. With all the environmental challenges facing the world
today, these achievements deserve close consideration.
In addition to these economic and environmental questions, recent events in Qatar are a reminder
that security of gas supply cannot be taken for granted. Our upcoming report Global Gas Security
Review 2017 will analyse these challenges. Furthermore, we will take a detailed look at all aspects of
the long-term prospects for gas in the World Energy Outlook 2017, to be published in November.
The IEA works to help governments, industry and citizens make good energy choices. Our goal is to
provide policy makers and other stakeholders with a clear assessment of the evolving role of gas in
the global energy market and to lay out its implications over the next few years.
Dr. Fatih Birol

Executive Director
International Energy Agency
G AS M ARKET R EPORT 2017 3

A CKNOWLEDGEMENTS
ACKNOWLEDGEMENTS
This IEA’s renamed Gas 2017 market report was prepared by the Gas, Coal and Power Markets
Division (GCP) of the International Energy Agency (IEA). The analysis was led and coordinated by
Rodrigo Pinto Scholtbach, consultant senior gas expert. Willem Braat (co-coordinator), Pedro
Céspedes Ruiz, Volker Kraayvanger, Minoru Muranaka and Rodrigo Pinto Scholtbach are the authors,
with contributions of Jaime González-Puelles and Costanza Jacazio.
Keisuke Sadamori, Director of the IEA Energy Markets and Security (EMS) Directorate, and Peter
Fraser, head of GCP, provided expert guidance and advice. Special thanks go to Carlos Fernández
Alvarez and Tim Gould for their advices and support throughout the process.
Significant written contributions were delivered by IEA colleagues, especially Mariano Berkenwald,
Kate Dourian, Marc-Antoine Eyl-Mazzega, Carlos Fernández Alvarez, Donghoon Kim, Oskar
Kvarnstrom and Yunhui Liu.
Valuable comments, data and feedback were received within the IEA, from Elie Bellevrat, Sylvia
Beyer, Aad van Bohemen, Toril Bosoni, Amos Bromhead, Laura Cozzi, Ian Cronshaw, Brian Dean, Jörg
Husar, Peg Mackey, Christophe McGlade, Ulises Neri Flores, Pawel Olejarnik, Paul Simons, Aitor Soler
García, Johannes Trueby, Laszlo Varro, Heymi Bahar and Brent Wanner.
Timely and comprehensive data from the Statistical Division were fundamental to the report.
A special thanks goes to Therese Walsh and Erin Crum for editing the report.
The IEA Communication and Information Office (CIO), particularly Rebecca Gaghen, Astrid Dumond,
Jad Mouawad and Bertrand Sadin provided essential support towards the report’s production and
launch.
The review was made possible by assistance from Tokyo Gas, Enagás, Uniper and the Ministry of
Economic Affairs of the Netherlands.
4 G AS M ARKET R EPORT 2017

T ABLE OF CONTENTS
TABLE OF CONTENTS
Foreword ..................................................................................................................................... 3
Acknowledgements ...................................................................................................................... 4
Executive summary .................................................................................................................... 11
1. Demand ................................................................................................................................. 15
Global overview..................................................................................................................................... 15
Assumptions .......................................................................................................................................... 18
OECD Demand ....................................................................................................................................... 19
Americas ............................................................................................................................................ 19
Europe ............................................................................................................................................... 26
Asia Oceania ...................................................................................................................................... 31
Non-OECD Demand ............................................................................................................................... 37
China .................................................................................................................................................. 37
Asia (non-OECD) ................................................................................................................................ 42
FSU and Europe (non-OECD) ............................................................................................................. 45
Middle East ........................................................................................................................................ 46
Africa ................................................................................................................................................. 49
Latin America..................................................................................................................................... 53
References ............................................................................................................................................. 56
2. Supply .................................................................................................................................... 59
Global overview..................................................................................................................................... 59
OECD Supply .......................................................................................................................................... 61
Americas ............................................................................................................................................ 61
Europe ............................................................................................................................................... 66
Asia Oceania ...................................................................................................................................... 67
Non-OECD Supply .................................................................................................................................. 72
China .................................................................................................................................................. 72
Asia (non-OECD) ................................................................................................................................ 76
FSU and Europe (non-OECD) ............................................................................................................. 78
Middle East ........................................................................................................................................ 79
Africa ................................................................................................................................................. 83
Latin America..................................................................................................................................... 85
References ............................................................................................................................................. 87
3. Trade ..................................................................................................................................... 89
Global overview..................................................................................................................................... 89
Global gas trade..................................................................................................................................... 91
Pipeline gas trade .................................................................................................................................. 92
Bilateral energy relations .................................................................................................................. 93
New dynamics in the old European continent .................................................................................. 94
The gas arteries to China ................................................................................................................... 98

T ABLE OF CONTENTS
US shale production is shaping pipeline exports .............................................................................. 99

North Africa: Algeria repositions itself on the European market.................................................... 101
The Middle East: Expanding pipelines driven by an increasing demand ........................................ 101
South America: Gas pipeline deliveries a recurrent bilateral issue ................................................ 102
LNG trade ............................................................................................................................................ 102
LNG demand: A new group of thirsty LNG importers ..................................................................... 103
LNG supply: The second wave of LNG is underway ........................................................................ 108
LNG investments: The lack of new investments in LNG export infrastructure ............................... 113
References ........................................................................................................................................... 120
4. The essentials ........................................................................................................................121
Glossary ....................................................................................................................................127
LIST OF FIGURES
Figure 1.1 Global demand by sector, 2002-22 ..................................................................................... 15
Figure 1.2 Relative evolution of OECD and non-OECD demand, 2002-22 ........................................... 16
Figure 1.3 Gas prices development, 2012-17....................................................................................... 19
Figure 1.4 OECD Americas gas demand by country and by sector, 2002-22 ....................................... 20
Figure 1.5 US power generation by type, 2004-22 .............................................................................. 21
Figure 1.6 Gas consumption of US industry by selected sectors, 2010-22 .......................................... 22
Figure 1.7 Gasoline, diesel and CNG prices in the US, 2010-22 ........................................................... 23
Figure 1.8 Canadian gas consumption by sector, 2010-22 .................................................................. 24
Figure 1.9 Mexico’s fuel sources’ share by sector, 2000-15 ................................................................ 25
Figure 1.10 Mexico’s power generation by type, 2004-22 .................................................................. 25
Figure 1.11 OECD Europe gas demand by country and sector, 2002-22 ............................................. 26
Figure 1.12 Indicative prices for coal-to-gas switching in the United Kingdom and Continental
Europe, 2013-18 ............................................................................................................... 28
Figure 1.13 French power exports, imports and net flow in 2016....................................................... 29
Figure 1.14 Coal (including lignite) plus gas power generation in Germany, 2000-16 ........................ 30
Figure 1.15 Electricity generated by power-only gas and co-generation plants, and cost advantage ...
of coal versus gas power generation in Germany, 2010-16 ............................................. 31
Figure 1.16 OECD Asia Oceania gas demand by country and sector, 2002-22 .................................... 32
Figure 1.17 Japanese power generation by fuel and LNG import volumes, 2008-16 .......................... 32
Figure 1.18 Status of safety approval for nuclear power reactors in Japan, 2013-17 ......................... 33
Figure 1.19 Share of industrial demand in Korea, 2000-15 ................................................................. 34
Figure 1.20 Structure of the gas market in Korea (2015)..................................................................... 35
Figure 1.21 Planned gas consumption in other Chinese regions, 2015 and 2020 ............................... 40
Figure 1.22 Non-OECD Asia gas demand by country and sector, 2002-22 .......................................... 42
Figure 1.23 India’s power generation mix, 2000-16 ............................................................................ 43
Figure 1.24 Indonesia’s power generation mix, 2016-22..................................................................... 44
Figure 1.25 FSU and non-OECD Europe gas demand by country and sector, 2002-22........................ 45
Figure 1.26 Middle East gas demand by country and sector, 2001-22 ................................................ 47
Figure 1.27 Saudi Arabia power generation mix, 2016-22................................................................... 48

T ABLE OF CONTENTS
Figure 1.28 Saudi Arabia’s gas and oil power generation growth, 2010-22 ........................................ 49
Figure 1.29 Africa gas demand by country and sector, 2002-22 ......................................................... 50
Figure 1.30 Balance of demand and production Algeria, 2000-22 ...................................................... 51
Figure 1.31 Constrained power generation due to gas shortages in 2016 .......................................... 52
Figure 1.32 Latin America gas demand by country and by sector, 2002-22 ........................................ 53
Figure 2.1 Global gas production in 2002-22 and regional share in growth 2016-22 ......................... 60
Figure 2.2 OECD Americas gas supply by country, 2002-22................................................................. 62
Figure 2.3 US gas production growth by major shale region, 2010-16................................................ 63
Figure 2.4 Additional pipeline capacity from Marcellus/Utica region (selected projects) .................. 64
Figure 2.5 Incremental US gas production, 2012-22............................................................................ 65
Figure 2.6 Domestic gas production by Canada’s production regions, 2010 and 2016....................... 65
Figure 2.7 Composition of Mexico’s gas supply mix, 2010-22 ............................................................. 66
Figure 2.8 OECD Europe gas supply by country, 2002-22 .................................................................... 67
Figure 2.9 OECD Asia Oceania gas supply by country, 2002-22 ........................................................... 68
Figure 2.10 Natural gas supply and demand in Australia, 1989-2022 ................................................. 68
Figure 2.11 Australia’s LNG exports by country, 1993-2016................................................................ 69
Figure 2.12 Gas prices in Australia’s eastern region and LNG prices, 2010-16 .................................... 71
Figure 2.13 Average China city gate price, 2007-16............................................................................. 75
Figure 2.14 Wellhead prices for Indian production, 2014-17 .............................................................. 76
Figure 2.15 Non-OECD Asia gas supply by country, 2002-22 ............................................................... 77
Figure 2.16 FSU and non-OECD Europe gas supply by country, 2002-22 ............................................ 78
Figure 2.17 Middle East gas supply by country, 2002-22..................................................................... 80
Figure 2.18 Africa gas supply by country, 2002-22 .............................................................................. 83
Figure 2.19 Latin America gas supply by country, 2002-22 ................................................................. 85
Figure 3.1 Relation between natural gas consumption in producing countries, pipeline and LNG
exports................................................................................................................................. 90
Figure 3.2 Net import position per region and selected countries, 2016 and 2022 ............................ 91
Figure 3.3 Ukraine’s gas balance, 2002-16........................................................................................... 97
Figure 3.4 China’s supply portfolio sources by country, 2016 ............................................................. 98
Figure 3.5 Appalachian Basin gas production and pipeline exports from Canada to US, 2010-16 ...... 99
Figure 3.6 Composition of Mexico’s gas imports, 2010-22 ................................................................ 100
Figure 3.7 World LNG imports and exports, OECD and non-OECD, 2012-22..................................... 102
Figure 3.8 World LNG imports by region, 2012-22 ............................................................................ 103
Figure 3.9 Growth from small and new LNG importers, 2012-22 ...................................................... 104
Figure 3.10 Demand and contracted volumes relationship in Japan and Korea, 2010-22 ................ 105
Figure 3.11 LNG import sources and volumes in China, 2006-22 ...................................................... 106
Figure 3.12 China’s supply portfolio, 2016 and 2022......................................................................... 107
Figure 3.13 LNG contracted volumes in Europe, 2015-22 ................................................................. 107
Figure 3.14 LNG export capacity, 2016-22 ......................................................................................... 108
Figure 3.15 World LNG exports by region, 2012-22........................................................................... 109
Figure 3.16 Destination of US LNG exports by country, 2016............................................................ 110
Figure 3.17 Change of LNG export volumes from Qatar by countries, 2012-16 ................................ 112

T ABLE OF CONTENTS
LIST OF MAPS
Map 1.1 Global demand growth by region, 2004-10, 2010-16 and 2016-22 ...................................... 18
Map 1.2 US gas consumption by region in 2015 .................................................................................. 20
Map 1.3 LNG import facilities in Korea, 2017 ...................................................................................... 36
Map 1.4 Planned gas consumption development in China’s key regions, 2015 and 2020 (bcm) ....... 38
Map 2.1 Global gas supply growth by region, 2004-10, 2010-16 and 2016-22 ................................... 61
Map 2.2 US gas production growth in selected states, 2010 and 2015............................................... 63
Map 2.3 Natural gas infrastructure in Australia................................................................................... 69
Map 2.4 China’s gas supply sources, 2016 ........................................................................................... 73
Map 2.5 South Pars and the North Field .............................................................................................. 81
Map 3.1 International pipeline and LNG traded volumes in 2015....................................................... 92
Map 3.2 Mexico’s natural gas infrastructure, 2016 ........................................................................... 100
Map 3.3 LNG import countries and LNG import volumes, 2010-22 .................................................. 104
Map 3.4 LNG export countries and LNG export volumes, 2010-22 ................................................... 109
LIST OF TABLES
Table 1.1 Global demand by region, 2016-22 ...................................................................................... 17
Table 1.2 Planned gas consumption in the Beijing-Tianjin-Hebei region, 2015 and 2020 (bcm) ........ 39
Table 1.3 Planned gas consumption in the Yangtze River Delta and other Eastern China region,
2015 and 2020 (bcm) .......................................................................................................... 39
Table 1.4 Production of heavy-duty vehicles in China (in thousands) ................................................. 41
Table 2.1 Global gas supply by region, 2016-22................................................................................... 60
Table 2.2 New gas field development in Algeria .................................................................................. 84
Table 2.3 Major investments in gas projects in Egypt ......................................................................... 84
Table 3.1 LNG projects that took FID in 2016 .................................................................................... 113
Table 3.2 LNG projects that started operation in 2016 ..................................................................... 114
Table 3.3 LNG projects expected to start operation in 2017 ............................................................. 115
Table 3.4 LNG projects under construction (as of June 2017) ........................................................... 116
Table 3.5 LNG regasification terminals started up in 2016 ................................................................ 117
Table 3.6 LNG regasification terminals under development (as of June 2017) ................................. 118
Table 4.1 World gas demand by region and key country (bcm) ........................................................ 121
Table 4.2 World sectoral gas demand by region (bcm) ..................................................................... 122
Table 4.3 World gas production by region and key country (bcm).................................................... 123
Table 4.4 Fuel prices (USD/MBtu) ...................................................................................................... 124
Table 4.5 Relative fuel prices (HH 2007/WTI 2007/US APP 2007 = 1) ............................................... 124
Table 4.6 LNG liquefaction capacity operating and under construction as of
June 2017 (bcm/year) ....................................................................................................... 125
Table 4.7 LNG regasification capacity operating and under construction as of
June 2017 (bcm/year) ....................................................................................................... 126

T ABLE OF CONTENTS
LIST OF BOXES
Box 1.1 Not only gas prices matter: The case of the fertiliser sector .................................................. 22
Box 1.2 Winter 2016-17 security of supply issues in Greece, France and Italy ................................... 27
Box 1.3 Carbon prices in the United Kingdom and Continental Europe .............................................. 28
Box 1.4 Energiewende .......................................................................................................................... 30
Box 1.5 Meeting demand with new LNG players in Korea................................................................... 34
Box 1.6 Regional focus: Natural gas in China’s 13th FYP ..................................................................... 37
Box 1.7 Gas-fuelled trucks as an alternative? ...................................................................................... 41
Box 2.1 Changing market dynamics in the eastern natural gas market in Australia ........................... 70
Box 2.2 Recent pricing reforms for domestic production .................................................................... 73
Box 3.1 The OPAL pipeline and the European Commission’s inquiry into Gazprom ........................... 94
Box 3.2 Nord Stream 2 ownership restructuring ................................................................................. 96
Box 3.3 Destination of US exports in 2016......................................................................................... 110

E XECUTIVE S UMMARY
EXECUTIVE SUMMARY
Low prices give natural gas a helping hand
Gas will grow faster than oil and coal over the next five years, helped by low prices, ample supply,
and its role in reducing air pollution and other emissions. In our new five-year forecast to 2022, gas
demand will grow at 1.6% per year, a slight upward revision from last year’s forecast of 1.5%. This
means that annual gas consumption almost reaches 4 000 billion cubic metres (bcm) by 2022, from
around 3 630 bcm in 2016. Almost 90% of the anticipated growth in demand comes from developing
economies, led by the People’s Republic of China (hereafter, “China”).
Industry emerges as the main engine of demand growth, accounting for half of the forecast growth
in global gas demand. A growing use of gas in the chemical sector, strong demand for fertilisers in
countries like India and Indonesia, and the replacement of coal by gas in a host of smaller industrial
applications in China mean that industrial gas demand grows by almost 3% per year. Gas use for
transportation also grows rapidly, albeit from a much lower base, reaching 140 bcm by 2022 from
120 bcm in 2016. Demand in the main gas-consuming sector – power generation – continues to
expand, but at a much more modest rate of less than 1% per year. In many mature markets, the
rapid increase in power generation from renewables, combined with modest growth in electricity
demand, limits opportunities for thermal generation. In many emerging markets that rely on
imported gas, especially those without a price on carbon or strict regulations on air pollution, gas
faces very strong competition from coal.
Many countries are reforming their gas markets to increase the use of gas and to attract new
investments. A diverse group of countries worldwide, including Mexico, China and Egypt, are moving
ahead with important gas market reforms, allowing more private participation in the supply,
transport and marketing of gas, and introducing third-party access to gas infrastructure. If
implemented rigorously, these reforms can lead to more investments throughout the supply chain
and generate more sustainable demand and supply balances. Subsidies on fuels, including gas, are
being reduced substantially in many parts of the Middle East, North Africa, Latin America, and Asia;
this practice can expose gas to more competitive pressures in relation to other fuels and
technologies, but prices that reflect market fundamentals will also lead more efficient consumption
and enhance incentives for investment in new supply.
Gas gains a firmer foothold in South and East Asia
The availability of ample, competitively-priced supply helps to expand opportunities for gas in
Asia, where China accounts for 40% of global demand growth. After a period of slower growth in
2015-16, gas demand in China is forecast to rise by 8.7% per year to 2022, assisted by the policy drive
to improve air quality. China’s 13th Five-Year Plan provides strong policy support for gas, helping it to
counter tough competition from coal in almost every sector. Replacing coal in power generation,
household heating and industrial applications, such as textile, food and other types of manufacturing,
has the potential to substantially boost the use of gas in China. Consumption rises to almost 340 bcm
by 2022, of which imports account for 140 bcm, up from 70 bcm in 2016.
India leads growth in the rest of Asia. Gas accounts for only 5% of primary energy demand in
India, leaving plenty of room for expansion; and strong economic growth leads to higher
utilisation of gas-based power capacities and increased use in industry, led by fertilisers. This will
drive gas demand use to almost 80 bcm by 2022 from 55 bcm in 2016. Other countries in South

E XECUTIVE S UMMARY
Asia, notably Pakistan and Bangladesh, show a similar picture of strong growth underpinned by
cheaper LNG and incremental gas use for power and industry.
Resource-rich parts of the Middle East and Africa also see strong demand for locally-produced gas.
The Middle East will experience relatively strong growth in consumption of 2.4% per year, to around
540 bcm, met in the main by increasing domestic production. Growth is relatively strong in the
power sector, where there are opportunities to substitute gas for oil, as well as in the industry sector
as the region’s economies grow and diversify. Consumption in Africa rises even more quickly, at 3.1%
per year, to reach more than 150 bcm. Egypt, Algeria and Nigeria are the main countries pushing
consumption higher, even though lower hydrocarbon revenues and economic growth hold back
demand in some resource-rich parts of the continent. Elsewhere, annual gas demand growth in
Latin America averages 1.3%, while the consumption outlook remains flat in the Russian Federation
(hereafter, “Russia”), Eastern Europe and Central Asia.
Gas markets are approaching saturation in many parts of the developed world, but
consumption continues to grow in the United States
Gas use continues to grow in the United States, the largest gas-consuming country in the world,
albeit at a slower pace than during the period from 2010-16. Coal-to-gas switching in US power
generation, the main driver of gas demand growth in the recent past, will slow down significantly as
gas prices are expected to increase from the USD 2.5/million British thermal units (Henry Hub)
average seen in 2016. Most US growth in gas consumption occurs in the industrial sector, where
competitiveness continues to be boosted by cheap gas. Together with Canada and Mexico, countries
with whom the US gas sector is closely integrated, demand in North America as a whole will surpass
1 000 bcm by 2022 – one-quarter of global gas consumption.
European gas demand rose in 2016, thanks to low gas prices and coal plant retirements, but is
forecast to stay flat out to 2022. After four years of decline from 2010, European gas demand
increased for the second year in a row in 2016. Lower gas prices, higher coal prices, coal plant
retirements and nuclear outages in France have pushed up gas demand for power generation. In
Germany, gas-fired power generation increased substantially, reversing a continuous decrease since
2010. In the United Kingdom, the carbon price floor has supported an 8 bcm increase in gas demand
for the power sector between 2015 and 2016. Over the forecast period, demand will remain flat, as
growth will be constrained in the power sector by limited electricity demand growth and the
continued rise of renewables, and in industry by sluggish growth in European industrial output.
Gas consumption is expected to decline in Japan and Korea although a policy shift in Korea could
open up new possibilities for gas. Japan and Korea consumed around 45% of the globally traded
liquefied natural gas (LNG) volumes in 2016, with significant future volumes already committed. After
a big increase in gas use in the aftermath of the Great East Japan Earthquake and safety issues with
nuclear power plants in Korea, demand has started to decline in both countries. Gas demand is
expected to fall in both Japan and Korea throughout the forecast period, but there are significant
uncertainties over the trajectory in both countries. In Japan, 12 nuclear reactors received the green
light from safety authorities and 5 have restarted, although the size of the fleet restarting in the
coming years remains uncertain. Korea’s new government is targeting a reduced role for nuclear and
coal-fired power, which would lead to an increase of gas use.

E XECUTIVE S UMMARY
The United States takes the lead on global supply as the shale revolution gets a second wind
The United States, the world’s largest gas producer, will increase production more than any other
country over the next five years, accounting for almost 40% of global output growth. While overall
US production fell in 2016, output from the Marcellus basin continued to grow, underscoring the
ability of US gas drillers to counter the effect of lower prices by improving efficiency and producing
more gas with fewer rigs. The continuing development of the Marcellus and Utica shales is being
supported by the extension of pipeline infrastructure from the Appalachian region to ship more gas
to markets in the Northeast, Midwest, and Southeast regions of the United States and in Eastern
Canada. Over the forecast period, US gas output is expected to grow by 2.9% per year, adding around
140 bcm to global production. By 2022, the United States will produce approximately 890 bcm, or
22% of the total gas produced worldwide. Although US domestic demand for gas is growing due to
increased demand in industry, more than half of the production increase will be turned into LNG for
export. By the end of our forecast period, the United States will be well on course to challenging
Australia and Qatar for global leadership among LNG exporters.
The Middle East will see remarkable production growth, while limited access to markets means
that Russia grows more slowly. With expanding demand in the power and industrial sectors, the
Middle East will add around 70 bcm to world production as production increases to 650 bcm by
2022. Half of the forecast increase will come from Iran. Russia, the second-largest gas producer in the
world after the United States, has plenty of under-utilised production capacity in the Yamal peninsula
but will see its gas production grow only at an average rate of 1.5%; with demand in the domestic
market stagnant and flat-lining in its main European market, the opportunities for growth come
primarily from exporting LNG – via a new project in the Yamal peninsula – and, towards the very end
of the forecast period, the anticipated start of pipeline exports to China.
China becomes the world’s fourth-largest gas producer. China’s domestic production is expected to
increase by around 65 bcm to 200 bcm by 2022, representing growth of 6.6% per year, making China
the fourth-largest natural gas producer in the world. While challenging geological issues raise
uncertainties about the increase in domestic production, China’s national oil companies are
intensifying gas exploration and production activities in China.
Global LNG trade is growing while markets search for the right balance
The volume and diversity of LNG trade flows are increasing rapidly with the appearance of new
exporting and importing countries. Liquefaction capacity is expected to grow by 160 bcm over the
period to 2022, led initially by Australia (30 bcm), but with the largest increase in growth then
coming from the United States (90 bcm). This additional LNG capacity is being added to a market that
is already well supplied, particularly as demand is declining in some of the large, traditional LNG-
importing countries such as Japan. In these conditions, with relatively low LNG prices, exporters are
having to work hard to open up new markets. A sign of this effort is the rapid growth in the number
of countries importing LNG, which has already grown from 15 in 2005 to 39 today. This growth in
LNG has been helped by the increased use of floating storage and regasification units, and it will
absorb some of the surplus gas on the market as another eight countries are expected to add LNG
import facilities by 2022. Nonetheless, the growth in LNG demand is not expected to be sufficient to
rebalance the LNG market before the end of the forecast period.
Ample availability of LNG is putting pressure on traditional ways of pricing and marketing natural
gas. Over-supply and the decline in the price of oil have brought down natural gas prices in all
regions: the huge price divergences between regions seen as recently as 2013 – when prices in Japan

E XECUTIVE S UMMARY
and Korea were around six times US wholesale prices – have narrowed considerably. This has limited
profitable export opportunities for many players, at least temporarily. An intensely competitive
international supply environment is also loosening some of the pricing and contractual rigidities that
have characterised long-distance gas trade in the past. This change will be further accelerated by the
expansion of US exports, which are not tied to any particular destination and so will play a major role
in increasing the liquidity and flexibility of LNG trade.
Pipeline trade continues to grow but faces strong competition in many markets. Pipeline trade
between the United States and Mexico has expanded rapidly in recent years, and pipeline supplies to
Europe held their ground in 2016 despite the availability of LNG: Europe saw little change in LNG
imports as Russia, Norway and Algeria ensured that they maintained their strategic position as
suppliers to the European market. Europe’s import needs are set to grow in the coming years, mainly
because of the continued decline in indigenous production. Two long-awaited new gas trade routes
are anticipated to start operation in the next five years: an expanded connection between
Azerbaijan, Turkey and the main European markets via the TANAP and TAP pipelines; and the “Power
of Siberia” connection between Russia and China, which has the potential to become a major artery
of global gas trade in the future.
In Australia, higher LNG exports have raised domestic security of supply concerns. Gas prices in
Australia’s major eastern market have traditionally been very low but have now risen sharply, in part
because new export projects have created a pricing link with international markets. Higher end-user
prices have led to concerns about the impact on industrial competiveness. In response, the
Australian government has introduced a domestic gas security mechanism that gives it the power to
restrict exports if there is a risk of shortfalls on the domestic market.
Concerns about security of gas supply have appeared in some other major producing countries. In
Nigeria, Africa’s biggest economy, militant attacks on gas facilities, the absence of political reforms
and a lack of investment have led to structural gas shortages. The reduction in gas-fired power
generation by 50% from recent average levels has deprived millions of power and hurt the economy.
The recent standoff between Qatar and some of the other Gulf States and Egypt has also
underscored some potential risks to gas supply security from the Middle East: Qatar supplies around
30% of the world’s LNG.
Longer-term risks to gas security could also arise from a shortage of investment in new gas supply
infrastructure although the United States looks well placed to respond once international markets
show signs of tightening. Well-supplied markets in the short term are maintaining downward
pressure on prices and discouraging new upstream investment in LNG. In 2016 only two new final
investment decisions (FIDs) were taken to expand existing or build new LNG facilities and, at the time
of writing, only one FID has been taken so far in 2017. If major new investments in gas supply
struggle to make headway, this would increase the risk of a hard landing for gas markets in the
2020s; however, brownfield expansions of existing facilities, notably in the United States, provide a
safety valve since they could bring new gas to markets relatively rapidly once the need arises.

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1. DEMAND
Highlights
• Global gas demand is projected to increase by 1.6% annually on average over the period
2016-22, growth of around 60 billion cubic metres (bcm) per year. With demand increasing
by 10% over the forecast period, total gas consumption is expected to amount to 3 986 bcm
at the end of the forecast period.
• Industry demand, rather than power generation, is the main driver of growth. Industry
demand grows at 2.9% per year whereas power generation, which has dominated past
growth, grows at only 0.9% per year.
• Almost 90% of the demand growth happens outside the Organisation for Economic
Co-operation and Development (OECD). The People’s Republic of China (hereafter, “China”)
alone accounts for nearly 40% of the global demand increase. Non-OECD Asia and the
Middle East account for most of the rest. Demand for natural gas in the Middle East is
expected to surpass demand in OECD Europe.
• OECD demand for natural gas grows very slowly. The United States accounts for most of
the net growth in OECD demand, led by growth in industry. Together with Mexico and
Canada, demand in the region will surpass 1 000 bcm by 2022, meaning that one quarter of
the global gas will be used in North America, the only developed region where gas demand
is growing as demand falls in Japan and European demand is flat.
Global overview
• Gas demand will reach 3 986 bcm by 2022, increasing annually by 1.6% on average over the
forecast period, a bit faster than the 1.5% recorded over the prior six years. The demand
increase by 10% will be equivalent to an incremental 357 bcm between 2016 and 2022.
Figure 1.1 Global demand by sector, 2002-22
bcm bcm Change over period

4 500 300
4 000
250
3 500
3 000 200
2 500 150
2 000 100
1 500
50
1 000
500 0
0 - 50
2002 2007 2012 2017 2022 2004-10 2010-16 2016-22
Transformation Industry Residential/commercial Transport Energy industry own use Distribution losses

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• Gas demand growth in the power generation sector has slowed significantly. Over the past
dozen years, global gas demand for power generation has been the main driver of global gas
growth. This is no longer the case. Natural gas generation is getting squeezed out thanks to
more renewables and competition from coal. This report expects additional demand for
natural gas in power generation over the next six years to grow at 0.9% per year, less than
half the rate of growth of previous six-year period and much lower than the 4% recorded in
the period 2004-10 (Figure 1.1).
• Instead, it is industrial demand that is actually expected to pick up in the next six-year period,
with an average growth of 2.9% per year and accounting for almost 45% of the global
incremental demand. The projected growth in industrial demand reflects expected increasing
global economic activity especially in emerging markets and developing economies.
Important drivers behind the growth are also the positive outlook for the petrochemical
industry in regions such as North America and the Middle East and the need to boost
fertiliser production, especially in highly populated countries such as India and Indonesia.
• In 2016, the residential and commercial sector consumed around 750 bcm. At the end of the
forecast period, this sector will have increased its consumption by around 65 bcm, growing
modestly by an annual average of 1.5% and contributing around 20% to incremental demand
growth worldwide. Around 40% of the total incremental growth in demand in the residential
and commercial sector worldwide will occur in China due to government policy to promote
the use of gas in this sector. The second-fastest-growing region is the Middle East,
accounting for around 15% of the incremental demand. The modest growth is mainly caused
by a declining trend in Europe due to efficiency in the residential sector.
• The transportation sector will grow at a high pace (around 2.6%), although volumes are not
significant yet (140 bcm by 2022).
Figure 1.2 Relative evolution of OECD and non-OECD demand, 2002-22

bcm share
2 500 100%
2 000 80%
1 500 60%
1 000 40%
500 20%
0 0%
2002 2007 2012 2017 2022 2002 2007 2012 2017 2022
OECD Non-OECD
• Nearly all the growth in gas demand occurs outside OECD countries. This report expects non-
OECD countries to account for around 90% of the growth in gas demand to 2022. As a
consequence, non-OECD countries’ share of the global gas consumption will grow to 56%
from around 53% today. Demand in 2022 will amount to around 2 245 bcm per year.

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• The usage of gas in OECD countries will stagnate, showing an increase of only 0.4% over the
forecast period. By 2022 these countries will consume around 1 740 bcm.
Table 1.1 Global demand by region, 2016-22

CAAGR Contribution to
Region 2016* 2018 2020 2022
2016-22 global growth
OECD Americas 973 991 1 012 1 028 0.9% 16%
OECD Europe 507 509 507 505 -0.1% -1%
OECD Asia Oceania 218 213 211 206 -0.9% -3%
China 205 245 292 339 8.7% 38%
Non-OECD Asia 312 330 352 375 3.1% 18%
FSU/non-OECD Europe 654 655 658 662 0.2% 2%
Middle East 471 495 517 542 2.4% 20%
Africa 127 137 146 153 3.1% 7%
Latin America 163 166 171 176 1.3% 4%
Total 3 629 3 740 3 866 3 986 1.6%
Note: FSU = Former Soviet Union; CAAGR = compound average annual growth rate.
• In the prior period, 2010-16, gas demand in the power sector in the United States (US) was
the major driving force behind growth. As a relatively cheap and abundant fuel, gas has the
potential to further boost industrial development in the United States, in areas such as the
chemical sector.
• The main factor pushing demand upwards in China is the policy of the central government to
improve air quality, which is becoming critical considering increasing urbanisation.
• In the FSU and non-OECD Europe region, demand will show a minor increase. For the next
five years, gas demand for power generation in the Russian Federation (hereafter, “Russia”)
is expected to decrease, with more efficient gas-fired power generation capacities being
commissioned, a slight increase in nuclear power generation and moderate growth in
Russian gross domestic product (GDP).
• The growth in gas demand in the Middle East will be driven by a fast-growing population and
expanding energy-intensive industries such as the chemical, aluminium and steel sectors. The
industrial demand will grow at an average of 2.7% per year over the forecast period.
Furthermore, growth will be driven by new policies like those in Saudi Arabia, where the
government wants to boost gas generation capacity with the aim of reducing the share of oil
in the generation of power, thus keeping oil resources for export.
• Demand in OECD Asia is projected to decline over the forecast period due to lower
consumption in the power sectors in Japan and Korea. The decline in Japan will by caused
by nuclear power capacity coming back on line, flat electricity demand and continued
deployment of renewables. Korean demand remains uncertain: gas use in the power
sector was expected to be reduced by the start-up of new nuclear and coal-fired
generation. However, Korea's new government targets a nuclear phase-out and
curtailment of coal-fired power generation, which would lead to an increase in gas use.

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Map 1.1 Global demand growth by region, 2004-10, 2010-16 and 2016-22
• Africa’s gas demand is projected to grow at an average of 3.1% from 2016-22, three-tenths of
a percentage point lower than the growth forecast in last year’s report for the period
2015-21. The deceleration is caused by a sharp economic slowdown in countries such as
Nigeria and Algeria, as low oil and gas prices persisted in combination with difficult domestic
political and economic conditions. Latin America will show a modest growth of 1.3% over the
outlook period, reflecting the relatively weak economic performance of the continent and
the limited space for growth for gas beside hydro and other renewables.
Assumptions
As in previous medium-term reports, GDP growth assumptions in this report are derived from the
International Monetary Fund’s (IMF’s) April 2017 World Economic Outlook (IMF, 2017). This shows
global economic growth averaging 3.7% per year over 2017-22. The outlook foresees an increase in
economic activity in emerging markets and developing countries, partially supported by the gradual
recovery of commodity prices. For China, the IMF predicts an average GDP growth of 6% per year,
implying a slowdown of the economy compared with the previous period 2010-16. Despite the
deceleration, China will be one of the countries that contributes most to global growth. The GDP
growth rate of the United States is projected to be 2.3% in 2017 and 2.5% in 2018. In Europe,
increasing confidence will push up economic growth, producing annual growth of 1.8% over the
period 2017-22.
Oil price assumptions in this report are consistent with those in Oil 2017 (IEA, 2017a) released in
March 2017, and are based on the prevailing futures strip at that time when Brent futures were
trading at 58 United States dollars (USD) per barrel and staying at roughly this level through 2022.

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Regarding coal prices, this report assumes that coal prices in Europe will slowly decline from the
May 2017 level around USD 75/tonne (t) to around USD 62/t by 2022. Prices in Asia will follow a
similar trajectory, although a little bit higher, from almost USD 90/t in May 2017 to just over
USD 70/t by 2022. In the United States, prices are assumed to be stable, maintaining the current
strong divergence between the different regions of the country.
Gas price assumptions are based on the gas forward curves of May 2017. National Balancing Point
(NBP) and Title Transfer Facility (TTF) were traded at USD 5 per million British thermal units (MBtu) in
May 2017, and the forward curves are slightly higher around USD 5.2/MBtu for 2018-19 and are
assumed to stay at roughly this level through 2022. Henry Hub (HH) prices for the remaining year
equal USD 3.4/MBtu, and forwards up to 2021 are around USD 3/MBtu. Based on the oil price
assumption, the oil-linked LNG price would increase towards around USD 8.5/MBtu. The LNG spot
price stays low because of the LNG supply glut. Overall, throughout the forecast period, price
differences among several regions converge around the range of 2016 (Figure 1.3).
Figure 1.3 Gas prices development, 2012-17

USD/MBtu
25 NBP
20 Henry Hub
15
Japan LNG contract
10
Asian LNG spot
5
0 Brent
Apr-12 Oct-12 Apr-13 Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16 Oct-16 Apr-17
Note: NBP = National Balancing Point (United Kingdom).
Sources: NBP, Henry Hub, Japan LNG contract and Brent data: Bloomberg Finance LP; Asian LNG spot data: ICIS (2017), ICIS LNG Edge.
OECD Demand
Americas
Gas demand in OECD Americas is the highest of any region, accounting for nearly one-quarter of
world gas consumption. From 2016-22, demand is estimated to grow at an annual average of 0.9% or
around 55 bcm, a fraction of the impressive growth of 2.2% or around 120 bcm in the period
2010-16, which was driven by surging growth in gas demand in the power sector, especially in the
United States. At the end of the forecast period, OECD Americas will consume around 1 030 bcm.
Consistent with the global picture, growth in demand in the power sector tapers off in the forecast
period, making industry the most important sector in terms of growth. This includes gas demand
growth in the Canadian oil sands industry. Additional gas-fired power generation will contribute to
OECD Americas’ gas demand growth only in Mexico.

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Figure 1.4 OECD Americas gas demand by country and by sector, 2002-22
bcm bcm
1 200 1 200
1 000 1 000
800 800
600 600
400 400
200 200
0 0
2002 2007 2012 2017 2022 2002 2007 2012 2017 2022
Power generation Industry
Residential and commercial Transport
United States Canada Mexico Chile
Energy industry own use Losses
United States
Gas consumption in the United States will increase in the forecast period by an annual rate of 0.8%,
from some 780 bcm to 815 bcm, about 40% of the increase seen from 2010 to 2016. Gas demand in
the United States has shown regional differences, with the South being the main consumer of gas.
The South will remain significant for gas demand thanks to the importance of the chemical industry
in the region and incremental liquefaction capacity of around 100 bcm, connecting the United States
to the global LNG market. Improvements in pipeline infrastructure will ensure that the South will also
benefit from the Appalachia region’s vast and competitive gas supply potential.
Map 1.2 US gas consumption by region in 2015
Source: EIA (2017a), Natural Gas Consumption by End Use (database), www.eia.gov/dnav/ng/ng_cons_sum_dcu_SAL_m.htm.

D EMAND
The year 2016 saw very low natural gas prices and a record level of natural gas-fired power
generation. Going forward, natural gas spot prices are expected to be significantly higher than 2016,
above USD 3/MBtu, which makes gas-fired generation more expensive than that of coal, particularly
from the Powder River Basin in the western United States. Although at least an additional
35 gigawatts (GW) of coal capacity is expected to retire by 2022, there is still room for the remaining
237 GW of capacity to increase output. In addition, continuing renewables deployment is expected
throughout the period, and there will be weak growth in electricity demand. The level of gas
consumed in the power sector is expected to be at broadly the same level throughout the forecast
period.
As the power sector cannot duplicate its success for gas demand growth, the role of industry will be
more prominent for domestic demand during the forecast period; industry demand is expected to
grow by an annual average growth rate of 1.7%, from around 165 bcm to 180 bcm. The chemical
industry in particular, an important gas consumer with a share of around 40% during 2010-15, will
continue to be a driver for the forecast period: major companies, including those based outside the
United States, are ploughing ahead, subscribing to the expectation that US gas prices will remain at
competitive levels thanks to a large supply potential of US shale gas. Several methanol and ammonia
projects using natural gas as a feedstock are expected to start production during the forecast period.
But also ethylene cracker projects, using natural gas for power and heat generation, will contribute
to an increasing gas demand in the industry sector.
Figure 1.5 US power generation by type, 2004-22

TWh
5 000 Renewables
4 500
4 000
Nuclear
3 500
3 000
2 500 Gas
2 000
1 500 Oil
1 000
500
Coal
0
2004 2010 2016 2022
Note: TWh = terawatt hours.
The largest methanol projects are constructed by Yuhuang Chemical, a US subsidiary of China-
based Shangdong Yuhuang Chemical, and OCI, a global producer of natural gas-based fertilisers
and industrial chemicals based in the Netherlands. In April 2017, Yuhuang Chemical announced
that construction has started on the USD 1.85 billion methanol manufacturing complex in
Louisiana with an initial production capacity of 1.8 million metric tonnes per year (Yuhuang
Chemical Inc., 2017). OCI expects commissioning of its Natgasoline LLC methanol production
complex in 2017, an investment of around USD 1 billion that will add a production capacity of
around 1.75 million tonnes per year in Beaumont, Texas (Natgasoline, 2017). At the end of the
decade, additional methanol production capacity will be added from the Big Lake Fuels Methanol

D EMAND
Plant, a project of Houston-based G2X Energy Partners with 1.4 million metric tons of methanol
production capacity per year (G2X Energy Partners, 2016).
Major ammonia production capacity was added at the end of 2016, but additional capacity is
expected to come on line during 2017: Yara International and BASF’s ammonia plant in Freeport,
Texas, is expected to complete construction at the end of 2017 (Yara International, 2016), and
Simplot’s ammonia project in Wyoming also takes up operation during this year (Estes, 2016). Incitec
Pivot’s ammonia plant at Waggaman, Louisiana, completed final commissioning and testing in
October 2016 (Incitec, 2016) and CF Industries announced that its new ammonia plant in Louisiana
started up in September 2016 (CF Industries, 2016).
Figure 1.6 Gas consumption of US industry by selected sectors, 2010-22

Gas consumption by selected industry sectors Change over period
bcm bcm
200 20
150 15
100 10
50 5
0 0
2006 2008 2010 2012 2014 2016 2018 2020 2022 2010-16 2016-22
Chemicals (incl. feedstock) Iron and steel Food processing, beverages and tobacco
Pulp, paper and printing Other Total industry (forecast)
Box 1.1 Not only gas prices matter: The case of the fertiliser sector
To what extent incremental gas demand in the United States will be driven by industry depends on
several factors: price levels of natural gas in relation to alternative fuels (coal, oil), in combination with
relevant price levels in other regions, will affect the competiveness of US-based industry and influence
the development of US industry gas demand, for instance in the fertiliser industry.
As an example, how much North American urea producers are prepared to increase production capacity
and drive industrial gas demand does not depend only on North American gas prices, which directly
influence their profitability. It also depends, for instance, on gas prices in the Middle East and coal prices
in China, as these regions are competitors on the world market and influence the shape of the urea cost
curve for the global market (CF industries, 2017). Provided that other cost components do not change,
an increase in US gas prices could not only lead to decreasing profitability for North American producers
but also deteriorate the relative price advantage compared with other regions and/or fuels. Complexity
increases with different market mechanisms (regulated versus unregulated prices) and exchange rate
effects. Saudi Arabia, for instance, which has significant fertiliser production capacity, announced no
further price increases in 2017 after setting industry prices for methane to USD 1.25/MBtu at the end of
2015 (Gavin, 2017). Depending on decisions about further gas price increases during the forecast period,
Saudi Arabia is expected to stay a strong competitor. The construction of new industry projects or the
expansion of existing projects in the United States will therefore also depend on price developments of
gas or relevant alternative fuel sources in regions outside the United States.

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In 2016 (estimated), natural gas demand in the transport sector was around 20 bcm, or around 3% of
total natural gas consumption. Overall transport sector gas demand is expected to grow during the
forecast period by 1.8% annually, from around 20 bcm to 25 bcm. The significance of gas as a fuel
source for vehicles is relatively low, with a share of around 6% in the transportation sector. Between
2010 and 2016, natural gas demand for vehicles grew annually by around 6%, but fuel economics will
continue to play a major role in whether consumers switch to gas-based vehicles: after gasoline and
diesel prices dropped at the end of 2014, they reached a level that made it difficult for compressed
natural gas (CNG) to compete. Federal laws with the objective of reducing the use of petroleum in
the transport sector and incentivising gas will have continuing importance, as diesel and gasoline are
expected to stay competitive. However, in 2017, the international shipping company United Parcel
Service (UPS) announced it was investing in six new CNG fuelling stations and increasing its
alternative fuel fleet by 390 CNG vehicles and 50 LNG vehicles (UPS, 2017), supporting the view that
gas in the transport sector is recognised as a competitive alternative to petroleum during the
forecast period.
Figure 1.7 Gasoline, diesel and CNG prices in the US, 2010-22
USD/gasoline gallon
equivalent
4.5 Gasoline
4.0
3.5
3.0
2.5 Diesel
2.0
1.5
1.0
0.5 CNG
0.0
Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17
Source: Clean Cities Alternative Fuel Price Report (2017), Average Retail Fuel Prices in the U.S. www.afdc.energy.gov/fuels/prices.html.
In 2016, natural gas demand in the residential and commercial sector dropped from around 220 bcm
to 215 bcm, mainly influenced by a relatively warm year (NOAA, 2017). During the forecast period,
gas demand will grow again from the relatively low 2016 levels back to around 220 bcm; however,
variations in gas consumption will be mainly weather-related as electric space heating is expected to
defend its market share due to efficiency gains. Natural gas is the fuel of choice for space heating in
households, used by 47% of all US households (118 million) (EIA, 2017b). Around 62% of
US households rely on natural gas-based equipment (mostly central warm-air furnaces) in the (very)
cold US regions of the Northeast, Midwest and West.
Canada
Between 2010 and 2016, Canada’s growth in gas consumption was dominated by energy own use
(including gas use for extraction of oil sands), and this trend is expected to continue over the forecast
period. Gas consumption will increase by an average annual growth rate of 1.3%, from around
110 bcm to 120 bcm. Gas-fired power generation cannot maintain the pace of growth during
2010-16, which was mostly driven by the phase-out of coal power plants in Ontario (now completed)

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and gas-fired power plant additions in Alberta. Phase-out of coal-fired power generation in the
remaining regions including Alberta, Saskatchewan, Nova Scotia and New Brunswick will continue but
the timeline is 2030, creating limited room for additional gas to be consumed during the forecast
period. Furthermore, increasing the renewable share in Canada’s electricity mix is also on the
political agenda.
Further growth for gas consumption in the oil sands industry will depend on pipeline infrastructure
that is currently under construction to export additional crude oil quantities from Alberta to British
Columbia or the United States as exports represent roughly 75% of Canada’s crude oil production
(IEA, 2017a). Additional gas use in the oil sands industry will be around two-thirds of overall gas
demand increase but until pipeline projects are commissioned, rail shipments will have an increasing
importance for exports. Two major projects are Kinder Morgan’s Trans Mountain Expansion, which
will increase export capacity from Edmonton, Alberta to Burnaby, British Columbia (from
300 thousand barrels per day [kb/d] to 890 kb/d) and Enbridge’s Line 3 Replacement Project,
extending from Edmonton, Alberta, to Superior, Wisconsin, restoring the pipeline to its original
capacity of 760 kb/d (currently regulated to around 390 kb/d) (IEA, 2017a).
Figure 1.8 Canadian gas consumption by sector, 2010-22

bcm Change over period
140 bcm 20
120
15
100
80
10
60
40 5
20
0 0
2004 2010 2016 2022 2010-16 2016-22
Power generation Energy industry own use Transport Industry Residential and commercial
The major wave of liquefaction projects already coming on line, led by the United States and
Australia, does not incentivise investors to add large liquefaction capacity in Canada to a well-
supplied global LNG market: Shell put its final investment decision (FID) for Kitimat LNG on hold
(Crawford, 2017) and cancelled its Prince Rupert LNG in March 2017 (Prince Rupert LNG, 2017). The
Pacific Northwest LNG project is still under review by Petronas and no decision to move forward has
been taken at the time of writing. Cautious steps can be seen from Woodfibre LNG, which awarded
pre-construction works and plans to start with site remediation (Woodfibre LNG, 2017). Political
support for LNG in British Columbia depends on the balance policy makers strike between the
creation of additional jobs in the region and environmental concerns (e.g. increasing greenhouse gas
emissions).
Mexico
Mexico’s gas demand is expected to grow at an annual average growth rate of 1.4%, from around
80 bcm to 85 bcm in 2022. Around 60% of the increase is expected to stem from additional gas use in
gas-fired power production, a result of energy sector reforms in the country but also increased
availability of competitive gas from the United States.

D EMAND
Natural gas has expanded its share rapidly in this century. Whereas total electricity generation grew
by roughly 3% on an annual average basis between 2000 and 2015 (from 192 TWh to 307 TWh),
natural gas grew by 10% per year in the same period and increased its share from 16% to 60%. Oil,
which was the number one fuel in the generation mix in 2000, decreased its share from 45% to 10%
in 2015.
Figure 1.9 Mexico’s fuel sources’ share by sector, 2000-15

Power generation Industry Residential and commercial
100% 100% 100%
80% 80% 80%
60% 60% 60%
40% 40% 40%
20% 20% 20%
0% 0% 0%
2000 2005 2010 2015 2000 2005 2010 2015 2000 2005 2010 2015
Coal Oil Gas Nuclear Renewables Electricity
Natural gas power generation will grow until 2020, reducing generation by oil and coal, but
thereafter growth in renewable generation will limit further gas demand growth (IEA, 2016a).
Uncertainties about growth in gas consumption are not only due to competition from other fuel
sources but are also related to uncertainties in power demand growth.
Figure 1.10 Mexico’s power generation by type, 2004-22

TWh
350 Renewables
300
250 Nuclear
200
Gas
150
100 Oil
50
Coal
0
2004 2010 2016 2022
In the past, the central government was promoting natural gas for industry in the northern part of
Mexico developing the resources in Burgos basin, where industrial activity is higher than in the other
zones in the country. However the 2013-14 energy reform had a big focus on the electricity market,
turning it to a competitive framework and gaining an impressive momentum since the Mexican
constitution was modified in order to diversify the supply portfolio with new players and introduce
vigour into a sector of an overburdened state-owned utility, Comisión Federal de Electricidad (CFE)
(Federal Electricity Commission). At the start of the reform, declining regulated electricity tariffs
forced the CFE to increase investments, an important factor to allow using natural gas instead of the

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more expensive and also polluting fuel oil. Further investments in the market are pushed with an
auction system, where generation project developers bid for energy, capacity and clean energy
certificates (CECs). As the buyer, the CFE auctions long-term contracts resulting in relatively stable
cash flows for the project developer (15 years for energy and capacity, 20 years for CECs), and the
choice of generation technology is left to the bidder; these auctions attract investments from both
new and established companies, including foreign investors (IEA, 2016b). During 2016, two tenders
took place, the last one in September. The call for bids for the third auction was announced in May
2017 and results are expected to be published in November 2017 (Rodriguez, 2017). For the first
time, the auction is not only open for CFE but also for other buyers, however this auction is focusing
on increasing the share of clean energy sources to further diversify Mexico’s power production
portfolio. With respect to the separate generation capacity bidding, 1 187 megawatts (MW) per year
was purchased, of which 72% is combined cycle plants, 15% solar photovoltaic (PV), 11% wind and
the remaining geothermal.
Europe
For the second year in a row, gas demand in OECD Europe has grown. After leaving the 2014 low of
465 bcm, demand climbed from 480 bcm in 2015 to 507 bcm in 2016. The demand increase in 2016
was driven for the most part by gas demand for power generation and to a lesser extent by an
increase in residential gas demand due to colder weather compared with the warm winters of 2014
and 2015. Over the forecast period, total gas demand is expected to remain flat.
Figure 1.11 OECD Europe gas demand by country and sector, 2002-22
bcm
700 bcm 600
600 500
500 400
400
300
300
200
200
100 100
0 0
2002 2007 2012 2017 2022 2002 2007 2012 2017 2022
United Kingdom Germany Italy Turkey Residential and commercial Transport
The Netherlands France Spain Other Energy industry own use Losses
The main reason for the flat demand outlook is the expectation that a very large share of the
potential increase of gas for power generation in OECD Europe already took place in 2016 and will
decline slightly again towards 2022, being partly offset by a slight increase in industrial demand and
residential demand returning to where it was during average temperatures.
As described in last year’s market report, the share of gas in the power generation mix is dependent
on the power generation costs in comparison with other fuels (IEA, 2016c). From 2012 to 2015, the
gas price in Continental Europe was too high for gas to compete with coal on a marginal cost basis.
However, in 2016, a lower gas price combined with a steep increase in coal prices allowed gas to
compete with coal for power generation in some parts of OECD Europe. In the major power-
producing countries – the United Kingdom, Germany, the Netherlands, France, Spain and Italy – gas

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demand for power generation increased significantly in the second half of 2016. In 2016, these
interconnected markets experienced a drop in nuclear power while renewable generation and power
demand stagnated. Gas, as the marginal power source at the time, filled that gap and at the same
time replaced part of the coal-fired power generation.
Each country experienced its own market dynamic. In the United Kingdom, carbon pricing drove a
coal-to-gas switch that resulted in the largest growth of gas for power in Europe, increasing by more
than 8 bcm, equal to the big drop in gas for power the United Kingdom experienced in 2011-12. In
Germany, gas-fired power generation increased more than the decline in coal-fired power generation
and the decline in nuclear generation, while renewables generation and total power demand
stagnated in 2016. In France, the loss of nuclear capacity as a result of reactor safety issues led to a
moderate rise in gas-fired power generation. Another case is Italy, where both coal and
predominantly gas increased as a response to higher power export demand (IEA, 2017b).
Box 1.2 Winter 2016-17 security of supply issues in Greece, France and Italy
Greece, France and Italy experienced a tight energy market in winter 2016/17. A number of different
factors contributed to tight gas or power market situations.
• In Greece, the national gas system was declared to be at a crisis alert level by the Greek authorities in
winter 2016-17, because of concerns about very low storages levels while demand increased due to
cold weather and high consumption of gas for power.
• In France, the temporary shutdown of a number of nuclear reactors led to price peaks in the power
and gas exchange, a drop in power exports, an increase in power imports, and a number of days
where power capacity was just above demand. This situation also influenced the gas market in Spain
and Portugal, as there was higher gas demand for power generation (EURELECTRIC, 2017).
• The January 2017 cold spell in Italy led to high demand and storage withdrawals, and the authorities
declared an alert level for a part of the month.
No consumers in any of the countries experienced an outage of power or gas supply. But these
situations highlighted that despite the increased interconnectivity and expansion of infrastructure, a
tight supply situation in some regions can happen when temporarily high demand and a decrease of
supply occur simultaneously.
In our outlook power demand in Continental Europe remains flat and renewable electricity
production is expected to grow substantially more than the decline in European coal power
generation and German nuclear output. Add to this continuing moderate carbon prices and the
return of France’s nuclear fleet to previous output levels, this report forecasts a further decline of
gas-fired power generation in continental Europe by 2022.
This decrease in gas demand for power generation by 2022 will be partly offset by slight
increases in the residential and industry sectors. While temperature-driven residential demand
varies from year to year, 2016 was still below average, leaving some room for growth. Industrial
demand has decreased since 2013 and is expected to grow only marginally. In Europe, relatively
low economic growth and stagnating industrial gas demand were observed over the period
2010-16. As GDP growth over the forecast period is expected to be higher than the average over
2010-16, a very small recovery in industrial gas demand is expected.

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United Kingdom
In the United Kingdom, gas demand declined by almost 30 bcm from 2010-14, mostly driven by a
decline in gas-fired power generation and residential sector demand. Since 2015, gas demand has
picked up once again, with 13% demand growth in 2016 and an almost 40% increase in power sector
gas demand. A further small growth in the power sector is expected in the next years. This increase is
part of the permanent shift away from coal as a result of the carbon price floor (CPF) the
United Kingdom introduced in 2015. With this CPF and the current coal and gas forward prices the
remaining coal-generated power is expected to be pushed out of the energy mix in the coming years. In
addition, the phase-out policy for all coal plants by 2025 is discouraging any necessary investments
needed to keep coal plants running.
Box 1.3 Carbon prices in the United Kingdom and Continental Europe
The Carbon Price Floor (CPF) in the United Kingdom has triggered a substantial coal-to-gas switch in
2016. The CPF comprises the European Union emissions allowance (EUA) price under the European
Union Emissions Trading System (EU ETS) underpinned with a carbon price support. For the period of
2016-21, the carbon price support is capped at 18 British pounds (GBP) per tonne (20.3 euros per tonne)
of carbon emissions. Together with the EUA price, the CPF stood at GBP 21.8 per tonne (25.9 euros per
tonne) in the beginning of May 2017, which is five times higher than the price for carbon emissions in
the rest of the European Union.
Figure 1.12 shows an indicative gas price required for coal-to-gas switching for the United Kingdom and
Continental Europe. When the gas price is below the required price for switching, market prices support
coal-to-gas switching. In the United Kingdom the CPF pushes the gas price required for switching
upwards and thus the gas price is low enough to switch from coal to gas. In Continental Europe the gas
price and gas price required for switching are now much closer to each other than in 2012-15. The scale
of gas price movement needed for coal-to-gas switching in Continental Europe is relatively small
compared to 2012-15. This supported the coal-to-gas switch that occurred in the second half of 2016.
Figure 1.12 Indicative prices for coal-to-gas switching in the United Kingdom and Continental
Europe, 2013-18
United Kingdom USD/MBtu Continental Europe
USD/MBtu
12 12
10 10
8 8
6 6
4 4
2 2
0 0
2013 2014 2015 Sum Win Sum Win Sum Win 2013 2014 2015 Sum Win Sum Win Sum Win
'16 '16 '17 '17 '18 '18 '16 '16 '17 '17 '18 '18
Gas price required for switching Gas price Current forward curve
Note: Comparison is made using 36% efficiency for coal plants and 58% efficiency for gas plants. Gas prices, coal prices and carbon
(EUA) prices reflect market values as of May 2017.
With total electricity demand remaining flat up to 2022, nuclear power generation staying stable and
the ongoing deployment of renewable power generation, gas-fired power generation will be the only

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marginal power production source and thus will be the first (and only) source to make way for the
increase in low-carbon sources. By 2022, gas demand for power generation is expected to decrease
by 5 bcm compared with 2016.
France
In 2016, France experienced a dramatic drop in nuclear power generation capacity as more than one-
third of the country’s 58 nuclear reactors were ordered to go offline for safety reasons. This drop in
nuclear power generation had a strong influence on the power generation mix. As France is 75%
dependent on nuclear power, other power sources (gas, coal, renewables and oil) were not able to
make up for the total loss, and this led to a drop in power exports and increasing power imports,
especially in the last quarter of 2016 (Figure 1.13). North West Europe responded to France’s power
import needs and compensated for the loss of French power capacity.
Annual gas-fired power generation in France increased in 2016, leading to more gas imports. Gas-
fired power generation is expected to fall again as the nuclear fleet returns to normal capacity and
renewables continue growing during the forecast period. In 2022, total gas demand is expected to
drop to about 36 bcm.
Figure 1.13 French power exports, imports and net flow in 2016
TWh
8
7
6
Exports
5
4 Imports
3
Net flow
2
1
0
-1
Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16
Source: IEA (2017c), Monthly Electricity Statistics.
Germany
German gas demand increased by more than 9% to almost 90 bcm, with most of the increase being
attributed to the more than 5 bcm increase in gas for power generation. Residential demand increased
by about 5%. In 2016, gas was able to compete with coal in Germany. The main drivers behind this
competition and the expected development over the forecast period are described in Box 1.4.

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Box 1.4 Energiewende

Energiewende, one of the most common words in the energy debate, meaning “energy transition”, has
often been analysed in terms of its implications for nuclear power plants (NPPs), renewables and even
coal, but the role of gas is often overlooked. Yet given the more than 30% increase in gas-fired
generation in 2016, two questions arise: is this increase a consequence of Energiewende, and is this
trend sustainable?
First of all, the analysis should take a look at low-carbon, low-variable-cost sources that are dispatched
before coal and gas power plants. Figure 1.14 shows the radical change in the coal and gas power
generation trend since Energiewende was implemented (2008 and 2009 decreases are more related to
the financial crisis than to energy trends). Whereas coal and gas generation combined were growing
before Energiewende, since then the trend has reversed despite nuclear phase-out, mainly driven by
renewable energy and energy efficiency. However, in 2016, despite more than 5 GW of new wind and
1.5 GW of solar PV, growth in renewables generation stalled due to worse weather conditions.
Combined with nuclear plant closures, there was increasing space for gas and coal. Looking ahead, with
increasing renewable generation and energy efficiency curtailing power demand growth, gas- and coal-
fired power generation will continue to decline in the next two to three years, despite the closure of
1.3 GW Gundremmingen B (2017) and 1.4 GW Philippsburg 2 (2019).
A sharp increase of coal- and gas-fired power generation is expected by the end of the forecast period,
however, owing to the closure of around 4 GW of nuclear in 2021 followed by another 4 GW to be
retired by the end of 2022. Renewables will not be able to compensate for such a drop: the power
generation of NPPs closing in 2022-23 is equal to more than half of current wind and solar production.
Figure 1.14 Coal (including lignite) plus gas power generation in Germany, 2000-16
TWh
420
400
Coal- and gas-
fired power
380 generation
360
trend
340
320
2000 2002 2004 2006 2008 2010 2012 2014 2016
In general, cheaper gas, more expensive coal and a carbon price should lead to more gas and less
coal generation. But things are not straightforward for a few reasons. First of all, dispatch of co-
1
generation plants selling both electricity and steam is not price sensitive, as shown in Figure 1.15.
In addition, the variability of wind and solar means that in some periods power grids are crowded
with renewables (and nuclear) without much room for thermal generation, regardless of the price.
On the contrary, during other periods of low wind and solar generation, most thermal plants are
1
Co-generation refers to the combined production of heat and power.

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called upon to meet demand. This explains the relatively low price sensitivity of power-only gas-
fired power plants, seen in Figure 1.15
Indeed, examining competitiveness of coal versus gas requires far more granularity than shown in
Figure 1.15 which plots annual average prices. For example, during many weeks in 2016, gas was more
competitive than coal, triggering gas generation. Coal includes both hard coal, mainly coming from
imports, and domestic lignite, which is generally more competitive. Moreover, the cost advantage
shown in Figure 1.15 is made with standard efficiency values, but every gas and – especially – coal plant
has its own efficiency. Likewise, fuel delivery costs are also plant-specific. Last, but not least, in the
current European internal electricity market, neighbouring countries also play a role in defining gas
generation in Germany and vice versa. For example, coal and gas plants in Germany compete with Dutch
coal and gas plants. When coal generation is cheaper than gas, coal plants in Germany will displace gas
plants in the Netherlands. Another example was seen in European winter 2016/17, when German gas
power generation increased in order to offset the drop in nuclear generation in France, as noted earlier.
Figure 1.15 Electricity generated by power-only gas and co-generation plants, and cost advantage
of coal versus gas power generation in Germany, 2010-16
TWh USD/MWh
80 40
Utilities
60 30
Others
40 20
Generation
cost advantage
20 10 (right axis)
0 0
2010 2012 2014 2016
Note: MWh = megawatt hour.
In short, for the future, based on this report’s price assumptions and the current schedule of plant
retirements, strong coal-to-gas competition is expected. While this will add pressure to gas demand in
power, it will still grow by the end of the period to offset the nuclear phase-out. Indeed, any policy
change affecting either nuclear, coal or renewables will also impact gas-fired power generation.
Asia Oceania
Demand in OECD Asia Oceania is projected to decline over the forecast period by 12 bcm, from
218 bcm in 2016 to 206 bcm in 2022, due to mainly lower consumption in the power sector in Japan.
Gas consumption in Australia is set to increase, thanks to the combination of continuous growth of
gas-fired power generation over the forecast period due to the decrease of coal-fired power
generation and new LNG production ramping up, with the expected completion of LNG projects
currently under construction by 2019.

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Figure 1.16 OECD Asia Oceania gas demand by country and sector, 2002-22
bcm bcm
250 250
200 200
150 150
100 100
50 50
0 0
2002 2007 2012 2017 2022 2002 2007 2012 2017 2022
Japan Korea Australia New Zealand Residential and commercial Transport
Japan
Japan’s gas demand is forecast to decline due to nuclear power capacity coming back on line, flat
electricity demand and continued deployment of renewables. This report assumes that 17.5 GW of
nuclear capacity, around one-third of the capacity operating in 2010, will be running by 2022, and strong
growth of renewable energy generation, around 5% per year, will result in a decline of 20 bcm of gas
consumption in gas-fired power generation from 2016 levels. In April 2017, the Japanese gas market has
been fully liberalised, with the opening up of a retail gas market of around 2.4 trillion Japanese yen
(USD 21 billion) for residential and small business customers, one year after power market liberalisation.
Competition among the traditional and new city gas companies would be enhanced, but this report
assumes that gas consumption of the residential and commercial sector will not be heavily affected, and
the gas consumption of this sector is forecast to be stable. Gas consumption in other sectors is also
forecast to be stable. As a result, LNG imports will also fall by volumes similar to what is seen in the power
sector. However, the return of nuclear capacity is still not a certainty, and the decline of gas demand in
the power sector will be heavily affected by nuclear power output.
Historically, nuclear power has played a significant role in Japan. It accounted for roughly 26% of total
generation before the Fukushima Daiichi nuclear accident, or about 290 TWh in 2010. However, in the
three years following the disaster, all nuclear power plants ceased operation gradually (Figure 1.17).
Figure 1.17 Japanese power generation by fuel and LNG import volumes, 2008-16
TWh bcm Gas
1 400 140
Oil
1 200 120
Coal
1 000 100
Biofuels and waste
800 80
Other renewables
600 60
Hydro
400 40
200 20 Nuclear
0 0 LNG import volumes

2008 2009 2010 2011 2012 2013 2014 2015 2016E* (right axis)
* Estimated.
Sources: METI (2016), Power Generation Performance; IEA (2017a), Electricity Information (database), www.iea.org/statistics/.

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One-third of the gap created by this loss of nuclear power generation has been filled through
demand response and efficiency improvements in electricity usage, and two-thirds has been covered
by increased fossil fuel-based power generation. Half of the incremental power generation by fossil
fuels was met by gas-fired power generation, totalling almost 100 TWh and leading to a 20% increase
in LNG imports.
Japan has 42 nuclear reactors and 3 units under construction, equal to around 45 GW in total (Figure
1.18). In order to restart a NPP, approval from the Nuclear Regulation Authority (NRA) is required as a
precondition. The NRA was established in 2012 as an administrative body in charge of ensuring the
safety of nuclear plants. The regulations set by the NRA are among the world’s most stringent and
incorporate the newest nuclear safety standards. At the time of writing, 12 nuclear reactors have already
obtained approvals, and 14 are applying and under review for safety approval to restart. Nineteen
nuclear reactors have not yet applied. After almost three years of practically no nuclear generation, a
reactor came back on line in southwest Japan in August 2015 and a second one restarted operations in
late 2015. Two other reactors, restarted in early 2016 and immediately shut down following the issuance
of an order by a district court, restarted in Q2 2017 following the Osaka High Court’s decision to scrap
the injunction issued by the lower court. A fifth reactor restarted in August 2016. An additional seven
reactors are preparing for restarts after approvals. Three of these should be in operation in 2017 and
four in 2018, assuming they come on line one year after obtaining permission.
Figure 1.18 Status of safety approval for nuclear power reactors in Japan, 2013-17
GW
60
Decommissioned
50
Not yet applying for safety permission
40
Applying for safety permission
30
Preparation for restart
20
In operation (stopped following court order)
10
In operation
0
2013 2014 2015 2016 2017*
* Data for 2017 are based on the status of nuclear power plants at the time of writing.
Sources: International Energy Agency (IEA) compilation based on information from companies’ websites.
In the longer run, the Japanese government expects nuclear power to regain its important role as a
source of baseload power generation, and in its most recent energy plan projects its share of total
generation to be between 20% and 22% by 2030. While the government’s long-term vision is clear,
local opposition to nuclear power remains deeply rooted, and there remain significant risks of delays
and slippages for new restarts.
Another pressure on gas consumption in the power sector is increasing generation from renewable
energy sources. Between 2010 and 2016, renewables increased from 10 TWh to 50 TWh, and most of
this increase was led by solar and wind power. This forecast assumes strong growth of renewable
energy generation at a rate of around 5% per year, equivalent to an increase of around 65 TWh from
the 2016 levels.

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By taking into account nuclear restarts and renewable energy growth, gas consumption in the power
sector will return to 2010 levels – meaning before the Great East Japan Earthquake – by 2020. The
decline of gas demand in the power sector will lead to a decrease of total gas consumption in Japan of
16 bcm from the 2016 levels by 2022. This would have a large impact on global LNG trade, as Japan is
the largest LNG-importing country, accounting for almost one-third of the global LNG trade in 2016.
Korea
The medium-term outlook for Korea’s gas demand is relatively weak, with total gas consumption
expected to decrease modestly by 2022. Half of the approximately 45 bcm of gas imported to Korea
in 2016 was consumed by the power sector. The industry sector accounted for 20% and the
residential and commercial sector accounted for 29%. Total power generation is forecast to increase,
but it will be difficult for gas-fired generation to find space. The plans of the former government of
Korea were to expand nuclear and coal capacity substantially. However, the Korean government
changed in Q2 2017. The new government targets a nuclear phase-out and curtailment of coal-fired
power generation, which would lead to an increase in gas use.
The biggest industrial consumers were iron and steel and chemical and petrochemical companies,
consuming more than 40% of natural gas within the sector (Figure 1.19). One of the main uses of gas
in the petrochemical industry is to provide hydrogen for refinery processes. Hydrogen can also be
converted from naphtha, and since the oil price began to fall in 2014, gas consumption in the
petrochemicals sector decreased due to the switch of feedstock from gas to naphtha. Economic
growth is also decelerating, with the spillover effect of the economic slowdown in China keeping gas
consumption growth in the industrial sector subdued.
Figure 1.19 Share of industrial demand in Korea, 2000-15

bcm
12
10
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Industry other Non-metallic minerals Chemical and petrochemical Iron and steel
Source: IEA (2017d), Natural Gas Information (database), www.iea.org/statistics/.
Box 1.5 Meeting demand with new LNG players in Korea

In 2017, the number of direct importers in Korea who procure and import LNG doubled from four to
eight. Four companies in the power, steel and petrochemicals sectors have been importing LNG since
2005. An additional four players in the power and petrochemical sectors joined this group in 2017, and
more new players are expected to do so in the near future with the expansion of privately owned
regasification terminals.

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The Urban Gas Business Act in Korea grants exclusive selling rights to one wholesaler, Korean Gas
Corporation (KOGAS), and 34 retailers. All city gas companies procure their gas from KOGAS, and end-
use consumers buy gas from city gas companies. Large-scale consumers – those who own power plants
bigger than 100 MW – are eligible for a direct contract with KOGAS. Retailers are granted concessions by
local governments to supply gas in each administrative district.
Large power producers and manufacturers are allowed to import LNG for their own use, and are
collectively called “direct importers” (Figure 1.20). This is allowed, however, only for new gas demand
that is not committed to KOGAS supplies. The only eligible demand is that from newly commissioned
facilities or that released from the commitment due to terminations or expirations of existing contracts
with KOGAS. Some companies have a waiver clause in contracts with KOGAS that enables them both to
import directly and to receive gas supplies from KOGAS. For example, one subsidiary of Korea Electric
Power Corporation (KEPCO) has had such a mixed supply since 2015.
Figure 1.20 Structure of the gas market in Korea (2015)
Source: IEA (2017d), Natural Gas Information (database), www.iea.org/statistics/.
The wholesale and retail tariffs are both composed of material costs and supply margins. The material
costs of the wholesaler, LNG and related costs, are passed on to large consumers in the power sector or
retailers, and the supply margin is set annually by the central government by considering the supply cost
of KOGAS with a proper level of return on investment. The material cost of retailers is made up of their
payments to the wholesaler and passed on to end-use customers. The retailer’s supply margin is
decided by mayors and governors and applied via the same rule as for the wholesaler’s supply margin.
Direct importers must secure regasification and pipeline capacities to deliver gas to their own facilities.
There are four regasification terminals owned by KOGAS and two privately owned by direct importers
(Map 1.3). Direct importers have contracted capacities mainly in the direct importer facilities. The first
direct importer LNG import terminal started operation in Gwangyang in 2005. More recently, Boryeong
LNG terminal started commercial operation in January 2017, unloading the first US shale gas cargo to
Korea. Open access to the gas trunk lines owned by KOGAS is guaranteed to the direct importers by the
Urban Gas Business Act.
The primary motivation for direct importing is cost-saving by procuring LNG directly, but at the same
time, direct importers need to meet their fluctuating demand by managing their LNG procurement
portfolio. Because of the gas-to-gas pricing and the destination flexibility, US LNG is quite attractive to
direct importers. The direct importers could procure LNG at competitive prices when HH-indexed LNG
prices are lower than oil-indexed LNG prices. The flexibilities in reselling, combined with free-on-board
basis contracts, provide an important option for direct importers to manage their demand and supply
balances and provide opportunities for LNG trading businesses. SK E&S is going to import 3.0 bcm per
year of US LNG, and GS EPS will import 0.8 bcm per year.

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Map 1.3 LNG import facilities in Korea, 2017

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Non-OECD Demand
China
This report sees strong growth of China’s gas consumption, with an annual average growth rate of
8.7% from 2016-22, from around 205 bcm to 340 bcm. This takes into account the overall forecast for
China’s economy. The IMF estimates that the Chinese economy will grow by 6.1% on average
between 2016 and 2022, around three-fourths the rate experienced from 2010-16. It is also expected
that the economy will see more emphasis on the service sector at the expense of the energy-
intensive industrial sectors.
While natural gas in China is not cost-competitive with coal, the government is emphasising that
increased natural gas use will lead to air quality improvements, particularly in urban areas. Whereas
Beijing and Shanghai have already fully eliminated coal-fired boilers in the urban area, key provinces
like Hebei, Shandong, Henan, Jiangsu and Guangdong have ambitious targets to eliminate small coal-
fired boilers (up to 20 tonnes per hour [t/h]) and switch to more efficient gas-fired boilers to combat
air pollution.
Small coal boilers are for example still used in the textile industry, and the switch from coal to gas
boilers has a huge potential for an increase of the industrial gas consumption during the forecast
period as provinces plan to fulfil their 2020 targets. This report expects that gas consumption in
China’s industry will increase by around 50 bcm between 2016 and 2022, driven by a replacement of
small industrial coal-fired boilers to gas-fired boilers and new factories (including chemical industry),
using gas as the preferred fuel source.
The substitution of gas for coal will also depend on a strong push of the relevant authorities and
financial incentives: Beijing for instance offers subsidies (CNY 55.000 [Chinese Yuan renminbi] per
tonne for coal-fired boilers with a capacity of less than 20 t/h and CNY 100 000 per tonne for coal-
fired boilers with a capacity over 20 t/h) (IEA, 2016c). So far, only few cities (e.g. Baoding and Handan
in Hebei province) have comparable subsidies to support a ban of small coal boilers. This emphasis
on air quality will be even more important as the urbanisation ratio (permanent urban residents in
relation to total population) increases to 60% by 2020 (Zhu, 2014). An additional 90 million people
would then have status as urban dwellers, but this also includes migrant workers who already live in
urban areas.
China’s signing of the Paris Agreement reinforced the role of natural gas in the country’s energy mix
as detailed in the 13th Five-Year Plan (FYP) for the medium term until 2020. Natural gas is envisaged
to be the only fossil fuel to increase its share in primary energy consumption, up from today’s 6% to a
range of 8.3-10% of primary energy consumption in 2020, equalling 305-365 bcm. As recently as
2005, gas was barely 2% of China’s energy mix.
Box 1.6 Regional focus: Natural gas in China’s 13th FYP

In 2015, gas consumption in China was 190 bcm, or around 6% of total energy consumption. At the
end of 2016, China’s National Development and Reform Commission (NDRC) and National Energy
Administration released the development plan for energy as well as natural gas (13th FYP), in which
the institutions proposed a new gas development goal. The plan targets an increase in gas-fired
power generation capacity to 110 GW (2020), almost doubling capacity over the life of this plan,
and the gas consumption rate in urban areas (gas consumers in urban areas in relation to total

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urban population) is planned to increase from 43% (2015) to 57% (2020). According to the plan,
China’s gas-consuming population will grow from 330 million to 470 million.
The Beijing-Tianjin-Hebei Region, Yangtze River Delta and Pearl River Delta will be the key regions for
the increase in gas consumption (Map 1.4). By 2020, the share of overall consumption in 11 provinces
and cities in these regions, plus Sichuan and Chongqing, in relation to China’s total gas consumption is
planned to increase from 62% (2015) to 67% (2020).
Map 1.4 Planned gas consumption development in China’s key regions, 2015 and 2020 (bcm)
Beijing-Tianjin-Hebei Region
Total gas consumption in Beijing-Tianjin-Hebei region is planned to increase from around 30 bcm (2015)
to 58 bcm (2020). The share in relation to China’s total gas consumption will increase from 15% to 16%.
To meet such robust demand growth, developments of conventional gas, shale gas and coalbed
methane will be promoted. The expansion of the gas pipeline network and also additional LNG import
facilities are planned. For instance, LNG regasification terminals will be constructed in the Tangshan port
and Huanghua port in Hebei.
Beijing: Growth should mainly come from distributed gas combined heating, cooling and power
systems, gas heating systems, and gas-fuelled vehicles. No new gas-fired power plants will be
constructed aside from the four main gas co-generation centres and three regional energy centres.
Tianjin: The industrial sector will be a main source for the increase. It is estimated that 5 bcm will be
consumed in the industrial sector by 2020, compared with 2.5 bcm in 2015 (annual growth rate of
14.7%). Gas-fired power plants, gas heating systems and gas-fuelled vehicles are also expected to make
contributions.

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Hebei: Gas in the residential sector is the first source for heating and cooking, and the gas consumption
rate in urban areas is planned to be higher than 50% by 2020. The share of gas-fired power plant
capacity is expected to be increased to 5% of the electricity mix. In the industrial sector, the share of gas
in the fuel mix is planned to be around 15%. Gas-fuelled vehicles are also planned to contribute to the
consumption increase.
Table 1.2 Planned gas consumption in the Beijing-Tianjin-Hebei region, 2015 and 2020 (bcm)
Share in relation to
Annual
Province/city Gas consumption (bcm) overall energy
growth
consumption
2015 2020* 2015 2020*
Beijing 14.6 20 6% 29% 33%
Tianjin 6.4 11 11.6% 9.5% 15%
More than
Hebei 8.5 27 26% Around 4%
10%
Total 29.5 58
Yangtze River Delta and other Eastern China region

Total gas consumption in the Yangtze River Delta (Shanghai, Jiangsu and Zhejiang) and other Eastern
China region (Shandong, Anhui, Fujian and Jiangxi) is planned to more than double from around 50 bcm
(2015) to 109 bcm (2020). The share in relation to China’s total gas consumption will increase from 26%
to 30%. To support the consumption increase, new pipelines, regasification terminals and gas refuelling
stations will be constructed (for instance, in Zhejiang, regasification terminals in Zhoushan port, Ningbo
port and Wenzhou along with 250 new natural gas stations for natural gas vehicles). In areas without
pipeline import options, LNG supply will be promoted, and the gas accessibility rate in urban areas in
Zhejiang is planned to be above 70% by 2020.
Table 1.3 Planned gas consumption in the Yangtze River Delta and other Eastern China region,
2015 and 2020 (bcm)
Share in relation to
Annual
Province/city Gas consumption (bcm) overall energy
growth
consumption
2015 2020* 2015 2020*
Shanghai 8 10 4% 10% 12%
Jiangsu 16.5 35 16.2% 6.6% 12.6%
Zhejiang 7.8 16 15.5% 4.9% 10%
Total 32.3 61
Shanghai: The capacity of gas-fired power plants is expected to more than double to around 8 GW
(2020). In addition, the upgrade of the gas heating system will be accelerated and the development of
gas-fuelled vehicles will be promoted.
Jiangsu: Gas-fired power will be the main source of the increase. Gas-fired power capacity is planned to
grow from 8.7 GW (2015) to 20 GW (2020), an increase of 18.2% per year.

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Zhejiang: Gas consumption in the residential sector for heating and cooking will be the main source of
this increase, and the gas consumption rate in urban areas is planned to be around 50% by 2020. Gas-
fired power as well as gas-fuelled vehicles and vessels also support growth.
Pearl River Delta (Guangdong)

Gas consumption will grow by an annual growth rate of 14%, from 14.5 bcm (2015) or 8.3% of overall
energy consumption to 28 bcm (2020) or 12% of the energy mix. Growth in gas-fired power capacity
from around 14 GW (2015) to 22 GW (2020) will be an important contributor, around 18% annual
growth rate. Gas use in the industrial and transport sectors accounts for the balance.
Sichuan and Chongqing

Thanks to historically high production of natural gas in Sichuan and Chongqing, the share of natural gas
use is much higher than the national average. In 2015, gas consumption in Sichuan was 17.1 bcm and in
Chongqing it was around 9 bcm, or 11.4% (Sichuan) and around 12% (Chongqing) of total energy
consumption. There will also be a significant increase in gas consumption in this area during the period
2016-20. For example, by 2020, gas consumption in Sichuan is expected to grow to 28 bcm, reaching
16.2% of overall energy consumption, which translates to an annual growth rate of 10.4%.
Other regions
The gas consumption in other regions will also increase significantly. For examples, in Shanxi of the
Northern China region, Jilin of the Northeastern China region, Henan of the Central China region and
Guangxi of Southern China region, as shown in Figure 1.21, gas consumption in these provinces will
increase from 16 bcm (2015) to 44 bcm (2020) with annual growth rates of 28.3% (Shanxi), 23% (Jilin),
11% (Henan) and 51.4% (Guangxi).
Figure 1.21 Planned gas consumption in other Chinese regions, 2015 and 2020
bcm
20
15
10
0
2015 2020 2015 2020 2015 2020 2015 2020
Shanxi Jilin Henan Guangxi
National gas utilisation policy, last updated in 2012, prioritises residential, commercial and transport
sectors in gas use. China’s growing seasonality of gas demand caused by more gas use in households
will be an increasingly relevant topic in the North and Northeast regions. To accommodate this, an
expansion of natural gas storage is planned from today’s modest 5.5 bcm of working capacity to
14.8 bcm by 2020. To support this development, the NDRC published a price reform policy on

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15 October 2016 to incentivise investments in gas storage (NDRC, 2016). Gas storage tariffs will now
be agreed between storage operators and shippers based on market price fundamentals. City gas
companies are specifically emboldened to invest in the construction of gas storage sites to be ready
to supply gas in peak cold-weather seasons. The smooth integration of gas storage in the gas market
(e.g. gas network operators aligning their activities and schedules with gas storage expansions) and
regular communication about prices are also part of the NDRC announcement. In June 2016, China
National Petroleum Corporation (CNPC) signed a Memorandum of Understanding with Gazprom on
prospects for mutual co-operation for underground storage (and also gas-fired power plants), but it
is unclear if this co-operation could effectively support current storage expansion plans.
In addition to increasing production and imports to meet growing and fluctuating gas demand,
demand-side measures have been introduced to free up quantities for heating when needed. CNPC
introduced gas price increases of up to 15% during winter for non-residential users in North and
Northeastern China. Should seasonal price increases for non-residential users become permanent for
industries, e.g. in Shandong, Hebei and Liaoning provinces, price competiveness versus coal will be
even more of an issue during the heating season.
Gas saw an annual growth rate of around 16% between 2010 and 2016 in the transportation sector,
reaching 20 bcm, or 10% of national gas demand. A part of the growth came from the use of natural
gas for trucks, and although the production of gas-fuelled trucks slowed sharply in 2015, a strong
push from the central government to improve air quality is raising the potential in this sector over
the medium term.
Box 1.7 Gas-fuelled trucks as an alternative?

In China, where road freight faces high fuel costs and contributes to rising carbon emissions and
persistent air pollution problems in cities, natural gas-fuelled trucks are gaining popularity for
commercial truck fleets. China’s market growth for natural gas trucks has been mainly driven by:
1) government policies, supporting the substitution of gas for oil in the transport sector; 2) the
competitive cost advantage of gas; and 3) lower investment costs of gas trucks, as existing oil-fuelled
models can be retrofitted. However, in the second half of 2014, the relative cost advantage towards oil
shrank as gas prices were not adjusted frequently enough to catch up with the decline in the prices of
diesel relative to gas. This development impacted heavy-duty vehicle production, leading to a decline in
the share of gas-fuelled vehicles in 2015. After production of gas-fuelled heavy-duty vehicles recovered
again in 2016 to 2012 levels (Table 1.4), the first four months of 2017 show a steep increase in
production: during January to April 2017, around 22 000 gas-fuelled heavy-duty vehicles were already
built, more than in 2016.
Table 1.4 Production of heavy-duty vehicles in China (in thousands)

2011 2012 2013 2014 2015 2016
Total production 822.7 541.1 760.6 747.4 546.8 741.4
Gas-fuelled 6.3 19.7 37.1 50.8 12.7 19.9
Share 0.8% 3.6% 4.9% 6.8% 2.3% 2.7%
Traditionally, natural gas-powered trucks were more common in the inland gas-producing provinces
(e.g. Xinjiang and Sichuan) as domestically produced gas (also being liquefied in small onshore

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liquefaction plants) was competitive versus oil. Better LNG accessibility in coastal regions, combined
with environmental policy measures to reduce emissions in Chinese cities, also promoted the use of
CNG and LNG in those regions.
A further increase of emissions standards might again have a positive influence on the penetration of
natural gas trucks – however this has to go along with a further expansion of the refuelling network.
Currently, a complicated approval process, in combination with difficulties in acquiring land to build new
refuelling points, is hampering expansion.
Sources: Wang (2016), “Natural gas in China’s transport sector”, www.gastechnology.org/Training/USChinaShaleWrkshps/March2016/
CBN-Tao-Wang-Transportation-Mar2016-EN.pdf.
Asia (non-OECD)
In this report, gas demand in non-OECD Asia is forecast to increase at an annual average growth rate
of 3.1%, from around 310 bcm in 2016 to 375 bcm in 2022. Over the forecast period, India, Pakistan
and Bangladesh account for two-thirds of regional incremental gas consumption due to the strong
economic growth of these countries (Figure 1.22).
Figure 1.22 Non-OECD Asia gas demand by country and sector, 2002-22
400 bcm 400
bcm
350 350
300 300
250 250
200 200
150 150
100 100
50 50
0 0
2002 2007 2012 2017 2022 2002 2007 2012 2017 2022
India Indonesia Malaysia Residential and commercial Transport
Thailand Pakistan Bangladesh Energy industry own use Losses
Strong economic growth in this region leads to increases in gas consumption in the industry sector,
accounting for more than half of the regional incremental gas demand, and the power generation
sector, which accounts for one-third of incremental gas consumption. Despite severe competition with
cheap coal, gas will still play an important role in meeting a significant increase in power demand.
India
Indian gas demand grows 25 bcm over the period 2016-22, more than any other country in the
region. This annual average demand growth of 6% is driven by an improvement in the economic
prospects of the country and the restart of part of the idle gas-based power capacity due to relatively
cheap LNG supplies. The use of gas will go up from around 55 bcm in 2016 to almost 80 bcm in 2022.
More than half of the total gas volumes available in India are used by industry, with the producers of
fertilisers as the largest industrial end users. For the period 2016-22, this report forecasts an increase
in industrial use by an average annual rate of 7%, much more rapid than the 1% seen in the previous
six years. Several factors drive the positive outlook of gas demand in this sector. The first is the
better-than-expected economic performance of India during the medium term, with a projected

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annual growth of 7.5% in 2017-18. Public consumption is expected to increase, supported by the rise
of public wages and pensions and higher agricultural output, and in many sectors new investments
are planned. A second crucial factor is the revision of the pricing guidelines for gas produced
domestically. With the aim of bringing domestic prices in line with lower international gas prices, the
government cut the price of domestically produced natural gas several times in 2016, further
cementing fertiliser producers as a priority sector under the government’s gas allocation policy. On
the other hand, the introduction of lower gas prices has helped the government to reduce direct
subsidies to the fertiliser sector.
In the forecast period, due to the availability of relatively cheap LNG, the volume of gas used by the
power sector will increase from a current 18 bcm to around 25 bcm by 2022.
Figure 1.23 India’s power generation mix, 2000-16

100%
80%
Others
60%
Gas
40%
Coal
20%
0%
2000 2002 2004 2006 2008 2010 2012 2014 2016
Despite robust growth, with a share of 5% in the power generation mix, the use of gas in India will
remain marginal. In 2009 the share of gas in the power mix reached its highest level of around 13%;
since then it has declined gradually. In comparison, the share of coal increased from 70% in 2000 to
almost 80% last year. Growth in coal consumption by the power sector has been strongly driven by
the policy of the government to meet growing domestic electricity demand. In addition to a strong
push to increase coal production in the country, the government has been encouraging the massive
installation of new coal-fired power plants, reaching 230 GW at the end of 2016. With a relatively
young coal-fired power plant fleet located close to the demand centres and coal prices for power
generation that cannot be beaten by other fuels, gas will not be able to gain a larger share in the
power generation mix of the country; the increase in gas-fired capacity will mainly remain an
instrument to reduce power shortages rather than to replace coal use. The space for the usage of gas
in the power sector will be further curtailed by the implementation of the ambitious renewable
capacity target of India to realise 175 GW by 2022.
Indonesia
The IEA forecasts that Indonesia’s gas demand will increase annually by 2% on average over the forecast
period, an acceleration of consumption compared with the annual growth rate lower than 1% recorded
over the previous period 2010-16. In the years to come, demand will be pushed upward by economic
expansion, leading to increasing use of natural gas by industry. This report expects demand to rise from
around 45 bcm in 2016 to around 50 bcm by 2022.

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Indonesian industry will remain the largest user, accounting for approximately half of total use. In
recent years, the government of Indonesia has followed a preferential policy to stimulate the usage
of gas by domestic industries, introducing regulations and new measures to cut natural gas prices for
the producers of fertilisers and the steel and petrochemicals industries. For some of them, a
reduction of gas transport fees has also been introduced. The measures aim to improve the
competitiveness of domestic industry.
Figure 1.24 Indonesia’s power generation mix, 2016-22

TWh
300
250 Coal
200
150 Gas
100
Others
50
0
2016 2018 2020 2022
At the same time, introducing lower regulated gas prices has negatively impacted the upstream
sector of the country, discouraging gas producers from increasing production. With production
unable to ramp up over the forecast period and an industry with an increasing hunger for gas, the
government will be forced to continue balancing domestic demand with its own domestic LNG
production and increasing imported volumes.
Over the forecast period, Indonesian power generation capacity will continue to expand
substantially, with most of the growth being led by coal. Endowed with coal reserves as abundant as
India, coal in Indonesia will remain the fuel of preference for the power sector, increasing its share in
the power mix from a current 54% to 62% at the end of the forecast period. Consequently, the share
of gas-fired power generation will fall from 25% to 21% between 2016 and 2022. Despite a relatively
smaller contribution in the power mix, the use of gas by the power sector is forecast to increase at an
average growth rate of 2%.
Malaysia
Malaysia is one of the only countries in non-OECD Asia that will experience a decline in gas demand
over the forecast period. With an annual average decrease of almost 1%, the country will consume
around 40 bcm by 2022. Two factors drive this outlook. First, Malaysia is expected to have lower
economic growth than recorded in the prior period 2010-2016 due to weaker external demand and
lower earnings from LNG exports. The second is related to the government policy to increase the
share of coal in the power mix of the country due to its cheaper price per energy output. Since
natural gas started to be used in the power sector around 30 years ago, it has been the preferred fuel
to generate power. However, currently the fuel of choice is coal, which will reach a share of 65% in
the total power mix by 2022. Together with a substantial retirement of gas turbine units and the

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steady introduction of new coal-fired generating units over the forecast period, the share of gas in
the power mix is forecast to almost halve from 46% in 2015 to only 25% in 2022.
In contrast with the declining trend in the power sector, the industrial usage of gas will slightly
increase despite the slowdown of the economy and a cumulative increase in the regulated natural
gas price of about 25% over the next three years. At the end of the forecast period, 40% of all gas
volumes available will be consumed by industry. This trend is the result of the industrialisation policy
that the government has been following since the 1990s supporting the establishment of industrial
and petrochemical complexes.
In January 2017, the amended Gas Supply Act came into effect, providing a legal framework to
liberalise the Malaysian gas market, enhancing competition with the introduction of third-party
access (TPA). Based on the new framework, third-party operators will be allowed to import, regasify,
transport, distribute and use gas. With the new market structure, the government aims to reduce the
monopoly position of the existing state-owned company Petronas Gas and the semi-public company
Gas Malaysia.
FSU and Europe (non-OECD)

In the FSU and non-OECD Europe, demand rose slightly in 2016 to around 655 bcm, and the forecast
to 2022 shows a minor increase driven by the Caspian region. Russian demand, with a 70% share for
this region, pulled demand up in 2016 but is expected to remain flat over the coming years.
Figure 1.25 FSU and non-OECD Europe gas demand by country and sector, 2002-22
bcm
800 bcm 800
600 600
400 400
200 200
0 0
2002 2007 2012 2017 2022 2002 2007 2012 2017 2022
Russia Caspian region Power generation Industry
Ukraine Belarus Residential and commercial Transport
Others FSU/Eastern Europe Energy industry own use Losses
Russia
Russia’s gas consumption increased by 2.4% to around 455 bcm in 2016 year-on-year, the first time
the country’s consumption has increased since 2011. Yet unless the country experiences a record
cold winter, demand is unlikely to return to 2011 levels in the foreseeable future.
As the economy exits recession, GDP growth is expected to be moderate at an average of 1% per
year. Total power generation is expected to grow slightly, and gas demand for power generation is
expected to decrease as more efficient gas-fired power generation capacities are being
commissioned and as nuclear power generation is slightly expanded. The reform in the district
heating sector has been pushed back until the presidential election and is expected to accelerate

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investments in modernisation after 2020, which in turn will improve the efficiency of gas
consumption in the sector and will offset the expected gas substitution of oil products by 2022. This
projection also assumes that domestic residential sector gas prices are not adjusted to market levels,
bringing no incentive to further reduce consumption in this sector, and that energy efficiency
investments in industry do not happen because the federal budget provide no incentives to do so.
Ukraine
Ukraine’s gas consumption slightly decreased in 2016 to a record low level of 33 bcm amid colder
temperatures and improved economic activity, marking a 50% decrease over ten years and an almost
40% decrease over the past four years. This comes during a slight economic recovery and a minor
increase in electricity demand. While the loss of control over some territories within Ukraine
accounts for about 5 bcm, the remainder of the decrease is explained by higher prices and tariffs,
recession, centralised district heating savings, and fuel switching. Household consumption is down to
13 bcm, from an average of 18 bcm at the start of the decade.
Ukraine’s gas consumption is expected to increase slightly by 2022. The economy is expected to
recover, and while there will be significant energy efficiency and gas saving investments by 2022,
some heavy industries are expected to shut down production. The slight pickup in industrial gas
consumption could be offset by lower technical gas consumption if transit volumes decrease, as well
as lower consumption in the residential and district heating segment.
Middle East
Gas demand in the Middle East is projected to grow at an annual average growth rate above 2.4%
between 2016 and 2022. The use by industry and the power sector will account for more than 75% of
the incremental growth in the region. The power sector will increase the most, absorbing 28 bcm
more by 2022 compared with 2016. With extra consumption of around 26 bcm over the forecast
period, industry will also continue pushing up demand in the region. At the end of the outlook
period, the Middle East is forecast to consume around 540 bcm per year.
In a region with large gas reserves, demand is outpacing supply, leading to shortages in some of the
key oil-producing countries of the region that now have to rely on LNG imports. Iran, for example,
the region’s largest gas producer, is the fourth-largest consumer of natural gas, leaving it with little
surplus for export due to its high demand for power generation, petrochemicals production and
enhanced oil recovery (EOR) purposes. A large volume of gas is flared due to the lack of sufficient
infrastructure. Saudi Arabia, the world’s second-largest oil-exporting nation, can barely satisfy
demand from its petrochemicals and power sectors, and is the second-largest consumer in the
Middle East after Iran. This is due to robust demand from the power and industrial sectors, where
fuel subsidies remain substantial.
Yet even as falling oil prices have prompted the Middle East’s producers to introduce fuel price
reforms, the price of gas is still low by international standards even though gas prices globally have
weakened. For many of the Middle East’s oil and gas producers, the focus is shifting increasingly to
development of gas amid a realisation by even the stalwarts in the Organization of the Petroleum
Exporting Countries (OPEC) that relying heavily on crude oil for revenues and to fuel economic
growth is no longer viable given the dramatic slump in oil prices and the need to switch away from
liquid fuels to generate electricity.

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Figure 1.26 Middle East gas demand by country and sector, 2001-22
bcm bcm
600 600
500 500
400 400
300 300
200 200
100 100
0 0
2002 2007 2012 2017 2022 2002 2007 2012 2017 2022
Iran Saudi Arabia UAE Qatar
Residential and commercial Transport
Oman Kuwait Iraq Other
Note: UAE = United Arab Emirates.
The lack of a unified gas price structure and the absence of any cross-border gas projects, with the
exception of the Dolphin Gas Project between Qatar and the United Arab Emirates, have prevented
development of a common regional gas grid that could alleviate some of the supply gaps. Finally, the
need for gas for seawater desalination is also a major driver of demand. Some 16% of electricity
consumption in the Middle East is used for desalination, and demand is set to grow in the years ahead.
Iran
This report expects Iran’s gas demand to increase at an annual average rate of 2.6% over the period
2016-22. This is lower than the 4.2% growth recorded over the previous six years, when demand growth
was driven by economic and population growth and supported by unsustainably high energy subsidies.
Total consumption of gas in the period 2000-16 rose threefold, from 62 bcm to 185 bcm. Yet even at a
slower growth rate, Iran’s consumption is expected to rise to 215 bcm by 2022, around 40% of total gas
consumed in the Middle East. The deceleration in demand growth is due to recent reforms to slash
subsidies and the government’s aim of curbing unsustainable demand growth, even as production
growth is set to accelerate in coming years following the lifting of international sanctions.
As the largest gas producer in the Middle East, Iran can meet nearly all of its demand by domestic
production, although it does import small volumes from Turkmenistan to cover peak winter demand.
Currently, gas accounts for more than 60% of Iran’s total primary energy consumption, of which the
power sector represents a third of the total 185 bcm gas consumption per year. Over the forecast
period, power sector demand is set to grow at an average 1.9% per annum while the industrial sector
is seen growing at 2.7% a year. Industry, which will use around 60 bcm a year, will account for 30% of
the demand increase by 2022. The expected growth in gas use by the industrial sector is due to the
country’s improved economic prospects and the anticipated resumption of foreign investment flows.
Although most of the incremental gas brought on line during the sanctions years has been the result
of development by indigenous Iranian contractors rather than foreign operators, further
development of remaining phases of the South Pars field is likely to involve some foreign
participation. Iran has negotiated a number of additional gas sales agreements with neighbouring
countries, among them Iraq and Oman, but it is unlikely to have much surplus gas for export given its
domestic requirements and the anticipated increase in demand for gas by the energy sector for EOR
as oil production is ramped up. The priority of the government is to utilise the additional gas to

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produce value-added products, a process that began in the late 1990s. It established the Pars Special
Economic Energy Zone (PSEEZ) in 1998 to encourage commercial activities centred on South Pars gas.
In March 2017, Ahdaf Investment Company, a subsidiary of the Iranian Petroleum Industry Pension
Fund, awarded Korea’s Hyundai Engineering a USD 3.2 billion contract to develop two phases of the
Kangan Petro Refining Company complex, located in the PSEEZ. South Pars Phase 12, the largest
single phase of the 18 already in operation, will provide feedstock.
Saudi Arabia
In Saudi Arabia, the second-largest consumer of gas in the Middle East, demand is expected to grow
at an average 1.8% annually, from around 90 bcm in 2016 to almost 100 bcm in 2022. The projected
growth reflects the initial impact of the National Transformation Program (NTP 2020), which was
launched last year with the aim of diversifying the Saudi economy and expanding an industrial base
centred on gas.
Among the targets set out in the programme is a doubling of dry gas production capacity by the end
of the decade and boosting the share of gas to 70% of its utilities fuel mix, freeing up crude oil for
export that is otherwise burned to produce electricity. At the same time, the government has been
introducing measures to optimise energy consumption by launching an energy efficiency
programme, cutting fuel subsidies, and adopting a market-oriented approach to pricing where fuel
prices are reviewed every six months and adjusted to align with international market prices.
Figure 1.27 Saudi Arabia power generation mix, 2016-22
2016 2022 1%
36%
44%
56%
63%
Gas Oil Other renewables
Saudi Arabia’s power generation grew almost 75% in the period from 2010 to 2016 period, rising from
240 TWh to 327 TWh. Oil-fired power generation accounted for 16 TWh of the increase, while the lion’s
share of the growth, 71 TWh, was due to higher gas-fired generation. Over the forecast period, further
expansion of gas combined with other measures to optimise energy consumption will lead to a fall in oil-
fired power generation by approximately 3 TWh and an increase of 55 TWh in gas-fired power
generation. This report forecasts that gas will make up 63% of Saudi Arabia’s power mix by 2022.
Gas consumption in the industrial sector will grow at an average annual rate of 1.5%, an increase of
0.7% over the estimate in the previous medium-term report. This revision is based on an anticipated
recovery in the petrochemicals sector. By 2022, the IEA estimates that industry demand reaches
almost 40 bcm.

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Figure 1.28 Saudi Arabia’s gas and oil power generation growth, 2010-22
bcm
100
80
60 Oil
40
20 Gas
- 20
2010-16 2016-22
United Arab Emirates

Since 2000, domestic consumption in the United Arab Emirates has been growing at an annual
average rate of around 6%, rising from 30 bcm to around 72 bcm in 2016. Over the outlook period,
demand will continue growing, but a much slower pace, going up from around 72 bcm in 2016 to
78 bcm by 2022.
Last year, the power sector accounted for around 55% of total gas use, driven by a fast-growing
economy and population. Gas-fired power generation capacity has been rising since the start of this
century at an average annual rate of almost 7%, with gas-fired plants generating around 95% of the
United Arab Emirates’ total electricity. At the same time, the far-reaching natural gas subsidy
scheme, which accounts for the majority of remaining energy subsidies of the country, has resulted
in one of the highest per capita energy consumption rates in the world. Although it is a gas producer
and exporter of LNG, it has struggled to meet demand despite the rise in production from its sole
operating sour gas field, the Shah field. This field is operated in a joint venture, with sales volumes to
its sole customers in Japan falling as the United Arab Emirates struggles to meet demand.
This report does not anticipate growth in gas demand by the power sector due to the expected start-
up in 2017 of the first of four units of the United Arab Emirates’ Barakah nuclear power plant. The
four nuclear reactors, which will add 5.6 GW of capacity, are part of a USD 20 billion investment by
the United Arab Emirates, which is set to become the first country in the Arab world to have a
domestic nuclear programme. Renewable energy, mainly solar, will also contribute to future supply.
Most of the incremental demand for gas will come from energy-intensive industries, where this
report sees an annual growth of around 3% over the forecast period. Most of the gas needed for
industrial use is likely to be supplied by expanding production from the United Arab Emirates’ sour
gas fields and the expansion of offshore gas supplies to connect to the onshore network. New EOR
technologies such as carbon injection are being tested to reduce gas injection requirements, which
account for a significant share of gas production currently (Ministry of Energy of United Arab
Emirates, 2016).
Africa
In this report, Africa’s gas demand growth is expected to be slightly lower over the forecast period
than projected in last year’s outlook. With an annual average growth rate of around 3% between

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2016 and 2022, gas demand will rise from around 125 bcm to approximately 155 bcm. Consumption
will remain concentrated in the power sector, consuming almost 60% of the total demand of the
continent. The share of the use of gas by industry in total consumption of the continent will remain
stable at around 25% over the forecast period.
The relatively slow pace of growth forecast is mainly attributed to Algeria and Nigeria, together with
Egypt the three major consumers and producers of the continent. Algeria has been experiencing a
sharp economic slowdown, and Nigeria, a recession, as low oil and gas prices persisted in
combination with difficult domestic political and economic conditions. In the years to come, some
economic relief can be expected for both oil-exporting countries, taking into account that the
agreement to cut production by OPEC and some non-OPEC producing countries will put upward
pressure on oil prices. In the case of Nigeria, the country has been exempted, together with Libya,
from the deal. An increase in oil production will undoubtedly alleviate the economic difficulties and
will have a positive effect on the demand side for Nigeria. Nevertheless, uncertainties around the
security situation in one of the largest economies of the continent make any upward expectation of
gas demand highly unlikely.
Figure 1.29 Africa gas demand by country and sector, 2002-22
bcm bcm
160 160
120 120
80 80
40 40
0 0
2002 2007 2012 2017 2022 2002 2007 2012 2017 2022
Algeria Egypt Nigeria Others Residential and commercial Transport
In other parts of Africa, natural gas is still a peripheral fuel in the energy mix. But in countries with large
reserves such as Mozambique, Tanzania and Kenya, the oversupplied LNG market and independent oil
companies’ reluctance to take FIDs for the construction of new LNG facilities have been persuading
governments to look closer to home for customers. In Mozambique, the government launched a tender
last year to select international companies to design, develop and invest in projects for the use of gas in
the power sector and the production of fertilisers and liquid fuel for domestic markets. Also, in its national
energy policy, Tanzania began putting emphasis on the role of the domestic and regional markets to
monetise its extended natural gas reserves. The sustained decline in commodity prices forced several
governments to delay or cancel crucial infrastructure projects, including natural gas projects. Even if some
planned natural gas projects reach the implementation phase, the use of gas in most of the countries will
remain limited over the forecast period.
Algeria
This report forecasts that demand growth in Algeria will decelerate from the high pace of the
2010-16 period, increasing at an average below 2.3% and rising from around 40 bcm to 45 bcm

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between 2016 and 2022. Factors driving the increase in the use of gas are a growing urbanised
population and a power generation capacity running 90% on natural gas.
With an economy depending disproportionally on the revenues of the hydrocarbon sector, lower oil
and gas prices in 2016 continued to negatively affect the economic, financial and trade balances of
the country. To finance the budget shortfall, the government has been making use of its international
reserves and borrowing externally. In its struggle to revive the economy, Algeria has also been
shifting its spending policy. In 2016, the government started delaying infrastructure projects and
raised gasoline, diesel and electricity prices for the first time in more than ten years. With the new
Budget Law 2017, the government presented an austerity package consisting of tax increases, a
freeze of public-sector salaries and a 10% rise in taxes on property rentals, and foreshadowed the
phasing out of the food subsidy system in the coming years (i.e. by 2019).
In addition to the new economic package, new ministers of finance and energy were appointed in a
cabinet reshuffle with the aim of driving diversification of the economy and increasing state
revenues. The aim is to ramp up gas production and to curb rising domestic use to free up gas for
export. This report forecasts that this policy shift will slow growth of gas demand in Algeria, but due
to a rapidly increasing population, the high dependency of the power sector on gas and the
stabilisation of production levels, substantial extra volumes for exports are unlikely.
Figure 1.30 Balance of demand and production Algeria, 2000-22

bcm
100
90
80 Expected exports
70
60
50 Production
40
30
20 Domestic
consumption
10
0
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022
Egypt
This report expects an annual average growth rate of around 3% per year over the forecast period.
This is a slight downward revision relative to last year, taking into account that the envisaged
reduction of fuel subsidies and the deepening economic problems of the country will have a
dampening effect on demand growth.
A key uncertainty over the demand outlook period is how much progress will be made with the
economic reforms announced by the government in 2016. Currently, energy subsidies constitute
more than 60% of total state subsidies in Egypt. In August 2016, the government presented a plan to
reduce expenses by eliminating electricity subsidies over a period of five years. Depending on
consumption levels, price increases can vary from 25-40%, with an expected increase for an average
household of 35% and for the commercial sector of 20%. At the moment of the decision to reduce

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subsidies, the IMF conditioned a new loan to Egypt in exchange for major economic reforms. In
August 2016, an agreement was reached between the IMF and Egypt for a loan of USD 12 billion.
At the end of last year, a new gas law was presented to the State Council and is expected to be
completed before the end of 2017. The new regulation introduces the principle of TPA to the
transmission and distribution systems and the establishment of an independent gas regulator. The
regulator will monitor the functioning of the market, determine tariffs for regulated activities, and grant
licences for new players to carry out the shipping or supply of gas. The regulator will also introduce a
framework for dispute resolution. Under the new gas market regulation, private companies will be
allowed to import gas. The state-owned Egyptian Natural Gas Holding Company (EGAS) is in charge of
issuing licences to private companies. As an important part of the reform, the Egyptian government has
also been reducing subsidies. In the year 2013/14, around USD 18 billion was spent on gas subsidies. The
government aims to spend only 20% of this amount in 2016 and 2017.
Nigeria
In 2016, Nigeria entered a recession for the first time in 20 years. Persistent low oil prices, together
with militant attacks on oil and gas facilities and the absence of political reforms, continued hitting
the second-largest economy of Africa. Gas demand is projected to recover to approximately 15 bcm
in 2022, going back to the level of the previous period assuming that the current structural shortages
will be solved.
Given the natural gas share of over 80% in the generation mix of the country, gas supply cuts to power
stations led to millions of Nigerians losing electricity supply and have had effects on important industrial
segments such as cement manufacturing. In the short term, these challenges are likely to persist.
Figure 1.31 Constrained power generation due to gas shortages in 2016

GW
7
5 Constrained power
generation due to gas
4 shortages
2 Installed capacity
0
Jan-16 Apr-16 Jul-16 Oct-16
Source: NERC (2017), Weekly Energy Watch, http://www.nercng.org/.
During 2016, structural gas shortages reduced the power generation capacity of the country by an
average of approximately 3 GW, around 50% of total installed capacity, leaving the largest part of the
power plant fleet without fuel. This worsening situation has paralysed the power sector, hampering
any new investments in metering, network expansion and maintenance.
Besides the devastating impact of pipeline vandalism on the power sector, the country is dealing with
profound market failure through the whole value chain of the gas and power sector. In Nigeria, the

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Domestic Supply Obligation prohibits gas producers from exporting gas until they fulfil the delivery
obligations to domestic power producers. In reality, with regulated electricity tariffs set too low
without reflecting costs, it has been more attractive for gas producers to sell more gas to the global
LNG market than to domestic power producers, and electricity distribution companies cannot pay for
the electricity they buy from the power generation companies. The current restrictive and
unprofitable price mechanisms and inadequate regulatory framework are frustrating new
investments in the expansion of generation capacity that is needed to produce sufficient power to
support sustained economic development of Nigeria. Since the introduction of the Gas Master Plan
of 2008, aiming to develop a mature gas market by 2015, limited investments have been made in the
sector. To prevent further deterioration in the gas and power sectors, the government of Nigeria
presented at the end of last year a new National Gas Policy. Taking into account the time needed to
overcome the challenges, it is hard to expect any substantial positive impact from the new policy on
Nigerian gas demand over the forecast period.
Latin America
Gas consumption in Latin America is projected to increase at an annual average rate of 1.3% over the
forecast period, from 163 bcm in 2016 to 176 bcm in 2022. This deceleration – substantially slower
than the 5% recorded over the prior six years – is due largely to economic slowdown in the region
(Figure 1.32). Brazilian gas demand decreases over the forecast period, while demand growth comes
mainly from Argentina, Bolivia and Colombia.
Figure 1.32 Latin America gas demand by country and by sector, 2002-22
0
bcm bcm
200 200
150 150
100 100
50 50
0 0
2002 2007 2012 2017 2022 2002 2007 2012 2017 2022
Argentina Brazil Bolivia Power generation Industry
Colombia Peru Trinidad and Tobago Residential and commercial Transport
Venezuela Others Energy industry own use Losses
Argentina
This report forecasts gas demand to grow close to 2% annually over the outlook period, at a faster
pace than the 1.5% registered during the 2010-16 period. Consumption will grow from around 50
bcm in 2016 to around 60 bcm by 2022, underpinning Argentina´s position as the largest gas market
in Latin America.
The natural gas market in Argentina is characterised by the fact that half of the electricity produced is
from gas-fired generation, and half of the fuel consumed in industry and the residential and
commercial sector is natural gas.

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Gas demand is primarily supplied from indigenous production and Bolivian imports. Both sources are
more competitive than imported LNG, which meets the large majority of remaining demand. Chile
started to export natural gas to Argentina last year, covering 1% of 2016 demand. Chilean imports
are less competitive than all other gas sources mentioned, but are still much more competitive than
the diesel price paid by the industry in the absence of gas. Last year diesel replaced 6% of total
industrial demand due to the unavailability of natural gas.
In the past decade, both natural gas and electricity consumption have been subsidised from the
government budget. In the gas sector, the subsidies paid in 2016 amounted to more than
USD 2.5 billion (equivalent to 0.5% of GDP), lower than the previous year when the price of imported
volumes was 40% higher.
Aiming to tackle existing problems and looking to improve gas market efficiency, the current
government has introduced a roadmap to 2022 to gradually remove gas price subsidies, essential to
recover supply costs and also to incentivise future investment. The new measures introduced are
seeking to restrict subsidies exclusively to low-income families (Social Tariff) and encourage the
population to make more efficient use of gas in the residential segment. A gas savings incentive has
been established where families who reduce their consumption by 15% will enjoy discounts ranging
from 20% to 50%. With these measures the government aims to free up the available gas volumes
for the power and industry sectors, in order to avoid the use of more expensive and polluting fuels
such as diesel in these two sectors. Minimising imports and the promotion of domestic production
are also part of a broader national strategy.
Brazil
While Brazil is expected to find its economic way up again, the economic downturn that began in
2014 has greatly impacted its prospects in the medium term. Over the outlook period, demand is
projected to decrease an average of 2.3% per year. At the end of the forecast period, the country will
consume around 33 bcm per year, 5 bcm lower than in 2016. Within the weak economic recovery,
Brazilian gas demand will be mainly pushed down due to a sharp decrease in the power sector
caused by hydro and renewables competition. This decrease is somewhat balanced by modest
growth in all remaining gas consumption sectors. Despite this fall in demand, Brazil still remains the
second-largest gas market in Latin America behind Argentina.
Gas demand in Brazil has historically been held back by structural factors such as lack of transparency
in the pricing mechanism of natural gas and its competing fuels, a lack of deployment of the new
distribution network, limited development of the secondary market, and different regional taxation
regimes. The recent Gas to Grow policy aims to enhance gas demand by opening the market to new
players and reducing the dominance of Petrobras. This will also mean promoting access to essential
gas infrastructure. Some signs of this opening are already taking place, such as the entrance of the
French company Total in the Bahia regasification terminal, or the sale of some transmission assets to
overseas companies. The introduction of a cost-reflective entry-exit regime for TPA is also planned as
part of the policy measures.
Gas-fired generation is used as a complementary source to hydro, but the room for gas to contribute
will continue to shrink in favour of growing renewable capacity. Therefore, many of the flexibility
requirements must be met by the gas-fired generation fleet. A number of projects have been called
upon to keep providing this flexibility in the future. These projects, known as LNG-to-wire, have
business models based on integrated solutions combining combined-cycle gas turbines (CCGTs) with
dedicated floating storage gasification units (FSRUs). At the time of this report, the first LNG-to-wire

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project to take final investment decision was Porto Sergipe. This project comprises a FSRU terminal
with a 1.5 GW CCGT. It was awarded with a power purchase agreement in the A5 auction in 2015 and
is expected to come on line by 2020. Other CCGT-plus-FSRU projects were also awarded in power
auctions; however, the uncertainty surrounding future gas demand in the power sector may trigger
significant delays or even cancellations.

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2. SUPPLY
Highlights
• Global gas production is forecast to increase by 1.6% per annum over the forecast period,
continuing the growth trend of the prior six years. Modest demand growth despite low
prices is impeding a more rapid expansion of production.
• The United States (US), the world’s largest gas producer, will increase production more
than any other country over the next five years, accounting for almost 40% of global
output growth. By 2022, more than one-fifth of total global gas production will come from
the United States, where gas producers will continue to show the ability to improve
productivity in a relatively low price environment.
• Production from FSU/non-OECD Europe is forecast to increase to around 950 bcm in 2022.
This growth is driven by increasing exports from the Russian Federation (hereafter,
“Russia”) and the Caspian region to China and OECD Europe and the ramp-up of Yamal LNG
in Russia.
• The Middle East will contribute almost 20% of global incremental growth. Despite lower
production growth than in the prior six years, the region will add around 70 billion cubic
metres (bcm) to the global production over the next five years.
• The People’s Republic of China (hereafter, “China”) will also show robust growth at an
annual average of 6.6%, adding almost 65 bcm to the global gas output.
Global overview
• Over the forecast period, global production will increase by 10%, going up from 3 615 bcm to
3 986 bcm by 2022. The United States will be the largest contributor to this incremental
production, while relatively strong growth will also take place in the Middle East, China,
Russia and Australia.
• After 2016, the first year of production decline since the beginning of the shale gas
revolution, natural gas production in the United States will rebound over the outlook period,
demonstrating the remarkable adaptability and flexibility of the US gas industry in a relatively
low price environment. Due to the expected rebalancing of oil markets, US oil production will
recover, leading to higher associated gas output. The extension of pipeline infrastructure in
the Appalachian Basin will also be an important driver behind production growth, creating a
larger transport capacity to bring additional quantities to the US Northeast/Canada, Midwest
and Southeast markets. Liquefied natural gas (LNG) exports might drive production, too (see
Chapter 3). Over the forecast period, production in the United States is estimated to grow at
2.9% per year, adding around 140 bcm to global production. By 2022, the United States will
produce approximately 890 bcm, maintaining its position as the largest producer worldwide.

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Figure 2.1 Global gas production in 2002-22 and regional share in growth 2016-22

5 000 160
4 000 120
80
3 000
40
2 000
0
1 000 - 40
0 - 80
2016-22
OECD Americas FSU/non-OECD Europe Middle East OECD Europe Non-OECD Asia
China OECD Asia Oceania Latin America Africa
Note: OECD = Organisation for Economic Co-operation and Development; FSU = Former Soviet Union.
• Over the forecast period, non-OECD countries will account for around 62% of global gas
production. This forecast is only 2% below the share in the period 2010-16, showing a strong
continuity in the contribution of non-OECD countries to global gas output. OECD countries
will see a slight increase in their share of global production, mainly caused by the expected
growth in the United States and Australia.
Table 2.1 Global gas supply by region, 2016-22

CAAGR Contribution to
Region 2016* 2018 2020 2022
2016-22 global growth
OECD Americas 958 1 000 1 060 1 099 2.3% 38%
OECD Europe 254 239 228 218 -2.5% -10%
OECD Asia Oceania 107 134 142 144 5.1% 10%
China 137 159 181 200 6.6% 17%
Non-OECD Asia 336 323 308 312 -1.2% -6%
FSU/non-OECD Europe 865 889 916 948 1.5% 22%
Middle East 583 598 623 651 1.8% 18%
Africa 202 223 232 237 2.7% 10%
Latin America 173 176 175 177 0.3% 1%
Total 3 615 3 740 3 866 3 986 1.6%
Note: CAAGR = compound average annual growth rate.
• European gas production will continue to decline thanks to falling investments, a mature
resource base and tighter restrictions on Groningen production in the Netherlands.
• Over the forecast period, OECD Asia Oceania will show a substantial increase in gas
production from 2016 levels, around 40 bcm by 2022, driven by the start-up of three new
LNG projects in Australia, as well as ramping up output from four recently completed
projects.

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• Chinese domestic gas production is projected to grow at an annual average of 6.6%, from
137 bcm in 2016 to 200 bcm at the end of the forecast period, roughly a half of a percentage
point higher than last year’s annual growth but below the expected pace set out in the 13th
Five-Year Plan (FYP) of the Chinese government.
• Gas production in non-OECD Asia is forecast to decline at an annual average of 1.2% between
2016 and 2022, compared with an average yearly increase of 0.2% over the prior six years.
The structural drop will be caused mainly by depletion of current gas fields and slow
investment in the low gas price environment in countries such as India and Indonesia.
• Production from FSU/non-OECD Europe is forecast to increase to around 950 bcm in 2022.
The main reasons for this growth are the increasing exports to China from Turkmenistan,
Russia, Kazakhstan and Uzbekistan, the increasing exports to OECD Europe from Azerbaijan
and the ramp-up of Yamal LNG in Russia.
• In the Middle East, gas output is projected to grow annually by an average of 1.8% per year,
up from around 585 bcm in 2016 to 650 bcm at the end of the outlook period. Iran, Qatar
and Saudi Arabia will account for around 75% of the incremental gas production in the
Middle East.
Map 2.1 Global gas supply growth by region, 2004-10, 2010-16 and 2016-22
OECD Supply
Americas
Gas production growth from OECD Americas is estimated at 2.3% between 2016 and 2022 from
around 960 to 1 100 bcm, driven entirely by the United States (Figure 2.2). An expansion of the

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pipeline infrastructure – freeing up transportation capacity bottlenecks from the Appalachian Basin
as well as the Permian Basin – supports production growth of the two most significant production
areas in the United States during the forecast period. Canada’s production will not increase in
absence of LNG liquefaction projects coming online during the forecast period and highly competitive
pipeline gas being imported from United States. Mexico’s production growth will stay almost flat, as
the country is also a destination for relatively inexpensive United States’ gas exports.
Figure 2.2 OECD Americas gas supply by country, 2002-22

1 200 160
1 000 120
800
80
600
40
400
200 0
0 - 40
2002 2007 2012 2017 2022 2010-16 2016-22
United States Canada Mexico Chile United States Canada Mexico
United States
During the forecast period, US gas production is expected to increase at an annual rate of 2.9% from
around 750 bcm to 890 bcm. Production growth will originate from the Appalachian Basin and
associated gas production from the Permian Basin.
During 2010-15, dry gas production grew by 160 bcm, from around 605 bcm to 765 bcm, mainly
driven by the shale gas production increase of the Appalachian Basin (Marcellus and Utica plays),
which increased the gas production share of Pennsylvania, Ohio and West Virginia in relation to
US dry gas production from 4% to 26% (EIA, 2017a) (Map 2.2).
Even when the steady increase of US production that began in 2005 stopped in 2016, gas producers
in the Appalachian Basin showed a remarkable resilience in this low price environment thanks to
favourable geologic conditions and by improving efficiency and cutting well costs since 2012 (EIA,
2016). Although year-on-year (y-o-y) growth from Marcellus and Utica dropped in 2016 to around
25 bcm, it was still clearly the fastest-growing region and more than four times higher than the
Permian Basin, which mainly produces associated gas and thus was driven by the oil price recovery
from below 30 US dollars (USD) per barrel (bbl) at the start of 2016 to around USD 55/bbl at the
beginning of 2017 (IEA, 2017a). Gas production in the other main shale gas plays decreased (Eagle
Ford, Niobrara and Haynesville) or stayed almost flat (Bakken) (Figure 2.3).
Associated gas production, particularly in the Permian Basin, is expected to grow significantly thanks
to cost and efficiency improvements, but also due to pipeline expansion projects that have been
announced to transport more gas to the US Gulf Coast. Kinder Morgan’s Gulf Coast Express, a
pipeline with planned takeaway capacity of around 17.5 bcm from West Texas to the Texan Gulf
Coast, attracted large interest in the non-binding open season during the first quarter of 2017: the

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pipeline, which is planned to be commissioned in the second half of 2019, is designed to transport
gas to Corpus Christi LNG or further to supply Mexican demand (Argus, 2017). The second gas
pipeline project, increasing takeaway capacity by 19 bcm from the Permian Basin to the Gulf Coast, is
Namerico Partners’ Pecos Trail Pipeline, a project that could also start operation in 2019.
Map 2.2 US gas production growth in selected states, 2010 and 2015
Source: EIA (2017a), Natural Gas Gross Withdrawals and Production (database),
www.eia.gov/dnav/ng/ng_prod_sum_a_epg0_fpd_mmcf_a.htm.
Figure 2.3 US gas production growth by major shale region, 2010-16

bcm
70 70.0Haynesville
60 60.0
Utica
50 50.0
40 40.0Marcellus
30 30.0Niobrara
20 20.0
10 10.0Permian
0 0.0 Eagle Ford
- 10 -10.0
Bakken
- 20 -20.0
- 30 -30.0
Total
2010 2011 2012 2013 2014 2015 2016
Source: EIA (2017b), Drilling Productivity Report (database), www.eia.gov/petroleum/drilling/ (accessed March 2017).

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Gas production from the Appalachian Basin will rise during the forecast period by 145 bcm,
increasing the share in US gas production from around 30% to 40%. Pipeline infrastructure
expansions, addressing bottlenecks to transport gas to the Midwest, Canada/Northeast and Gulf
Coast, will make that continued growth possible.
Currently, around 230 bcm of pipeline takeaway capacity from the Appalachia region (Ohio,
Pennsylvania and West Virginia) is already operational. By 2019, an additional 185 bcm is projected
to be added. Around 30% of the pipeline capacity to be built will transport the quantities from the
Appalachian Basin to the Gulf Coast, in order to supply the increasing demand from the chemical
industry but also to feed LNG liquefaction capacity, which will increase by around 95 bcm between
2016 and 2022. Around 45 bcm of pipeline capacity is also being built to Canada and the
Northeastern United States, where quantities from the large shale gas plays will find additional
outlets. As a result, the expansion of pipeline in this region will be a structural feature of the market,
further supporting the pipeline flows out of Appalachia and decreasing spreads between Henry Hub
and local price hubs, supporting the integration of the Appalachian Basin in US gas markets (Figure
2.4).
Figure 2.4 Additional pipeline capacity from Marcellus/Utica region (selected projects)
bcm/year
100 Gulf Coast
80
Atlantic/Southeast
60
Midwest
40
Canada/Northeast
20
Completed
0
2015 2016 2017 2018 2019
Source: Bloomberg New Energy Finance (March 2017); Range Resources (2017), Company Presentation – June 01, 2017,
http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9NjcyNTc0fENoaWxkSUQ9MzgwMzE2fFR5cGU9MQ==&t=1.
Due to the expected commissioning of massive LNG plants on the Gulf Coast and Atlantic Coast and
an increase in exports to Mexico, US gas flows will be redirected to these regions. Thus, US
production will be influenced not only by domestic demand dynamics but also by factors outside the
United States, including global LNG demand growth and the speed of the increase in Mexican
demand for gas. Conversely, US production dynamics may affect global LNG and gas markets
generally, as exports are priced off Henry Hub prices.
During the forecast period, the main share of incremental gas production is expected until the end of
this decade, mainly from the Permian Basin, which already showed a sharp increase in rigs since the
second half of 2016, and the Appalachian Basin, which will be supported by pipeline infrastructure
expansions, primarily in 2017 and 2018.

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Figure 2.5 Incremental US gas production, 2012-22

bcm
80
60
40
20
0
- 20
- 40
- 60
- 80
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
LTO associated gas Marcellus and Utica Others Total
Note: LTO = light tight oil.
Canada
Canada’s gas production will stay almost flat around 170 bcm during the forecast period. With flat
Canadian and US demand, Canada’s domestic production heavily depends on the development of
LNG export projects. Given existing LNG market conditions, and with significant new supplies coming
on stream elsewhere, LNG markets are expected to be well supplied through the forecast period, and
so any Canadian project is likely to come on line later.
Between 2010 and 2016, domestic production increased by 12 bcm from around 160 bcm to
172 bcm, with an annual average growth rate of 1.2%. Most of that increase happened in British
Columbia, whereas Alberta decreased its share in the same period by around 7%. Continuing
competition from US shale gas production is keeping North American gas prices under pressure and
Alberta’s production is likely to decline further. However, it remains by far the largest producer of
gas in Canada.
Figure 2.6 Domestic gas production by Canada’s production regions, 2010 and 2016
100% Other
80%
Saskatchewan
60%
40% British
Columbia
20%
Alberta
0%
2010 2016

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Mexico
Gas production in Mexico is expected to stay almost flat (after a decrease of around 15 bcm between
2010 and 2016), being displaced by an increase in pipeline imports from the United States, which
more than tripled over that period. Mexico’s gas production will hence be largely influenced by the
development of US natural gas prices and the attractiveness of further developing domestic gas
(Figure 2.7). As nearly all domestic production is associated gas – and this is not expected to change
during the forecast period – upstream cost and oil price developments will also influence how
Mexican gas production will progress (IEA, 2016a).
Energy sector reforms in Mexico open opportunities for new (upstream) players and put pressure on
Petróleos Mexicanos (Pemex). The appetite of private companies will depend on the competitiveness
of domestic gas versus US gas, and the oil price outlook. Once they enter the market, competition
with those new entrants will force Pemex to improve efficiency and increase productivity in its
activities in the existing fields. LNG imports are expected to lose ground to growing pipeline gas.
Figure 2.7 Composition of Mexico’s gas supply mix, 2010-22

bcm
100
LNG
imports
80
60
Pipeline
imports
40
20 Domestic
production
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Europe
OECD Europe gas production has been declining since 2004, reaching a record low of 254 bcm in
2016, approximately 2 bcm lower than the previous year. The 5% production increase in the
United Kingdom and two years of high production in Norway did not offset the fast production
decline from the small Dutch gas fields. Together with the Dutch Groningen production cap set for
the next five years, production is expected to fall, with an average annual decline rate of -2.5%,
reaching a production volume of around 220 bcm in 2022. Compared with last year’s forecast, the
projected production profile for the next three to four years is slightly more positive, as Norway and
the United Kingdom are expected to perform better than anticipated earlier.
Production from the continental shelf of the Netherlands and the United Kingdom is expected to
decline over the forecast period, although higher efficiency and major tax reductions in the United
Kingdom resulted in positive impacts on performance in 2015 and 2016. Capital investments in the
United Kingdom have declined for three years in a row, from nearly 15 billion British pounds (GBP) in
2014 to an expected GBP 6 billion in committed investments for 2017.

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Figure 2.8 OECD Europe gas supply by country, 2002-22

350 bcm 20
300 10
250 0
200 - 10
150 - 20
100 - 30
50 - 40
0 - 50
2002 2007 2012 2017 2022 2010-16 2016-22
Norway The Netherlands United Kingdom Other Norway The Netherlands United Kingdom
The Netherlands
Gas production from the Groningen gas field has been capped since 2014 as a response to increasing
seismic activity linked to gas production. The production cap has been increasingly tightened over
recent years, resulting in the most recent cap of 24 bcm for gas year 2016 and 21.6 bcm from 1 October
2017, set to last for five years. There is a possibility of increasing production by a maximum of 5.4 bcm
in a year, but only when colder-than-normal weather conditions occur. This report assumes that the
21.6 bcm production cap will remain unchanged up to 2022. As shown in previous years, the
production cap is dependent on political decisions, and therefore the outlook remains uncertain.
Further projected production decline in the Netherlands is driven by the country’s small fields, which
account for about 45% of current output. By 2022, small fields production is expected to decline by
about 15 bcm, by then accounting for only 20-25% of total Dutch gas production.
Norway
In Norway, production increased to 121 bcm in 2015 and 2016 and is expected to remain at this
higher production level. This forecast is higher than the one in last year’s report, which forecast a
decline of 12 bcm by 2021. Upstream investments went down by more than 25% from 2014 to 2016
and are expected to rise from 2018 onwards. But significant cost reductions for both exploration
activities and operation (for some projects in development, the constructions costs have halved)
have improved the production outlook by the Norwegian Petroleum Directorate (NPD, 2016).
Asia Oceania
Production in OECD Asia Oceania has historically been dominated by Australia. Over the forecast
period, the region will show a substantial increase in gas production, up by almost 40 bcm from 2016
to 2022, driven by the start-up of new LNG projects in Australia (Figure 2.9).

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Figure 2.9 OECD Asia Oceania gas supply by country, 2002-22

200 60
160 50
40
120
30
80
20
40 10
0 0
2002 2007 2012 2017 2022 2010-16 2016-22
Australia New Zealand Japan Australia
Australia
Australia is a large natural gas producer and one of the world’s leading LNG exporters. In 2015, total
natural gas production was 67 bcm, almost double that of 2005 (Figure 2.10). Australia’s production
is forecast to almost double again by 2020 from 2015 levels, and export volumes also increase rapidly
from around 40 bcm in 2015 to around 90 bcm in 2019 on the back of large new export projects. In
the eastern market, those new projects will triple gas demand and link the region to international
markets for the first time (Box 2.1). These two developments are causing severe tightness in
domestic gas supply in the eastern region of Australia.
Figure 2.10 Natural gas supply and demand in Australia, 1989-2022

bcm
160
Historical Forecast
140
120 Production
100
80 Imports
60 Exports
40
20 Domestic consumption
0
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Source: Historical data: IEA (2017b), Natural Gas Information (database), www.iea.org/statistics/.
Australia is divided into three separate gas markets: the eastern market (Queensland,
New South Wales, Australian Capital Territory, Victoria, South Australia and Tasmania), the western
market and the northern market. These markets are geographically isolated from one another, so the
transmission and distribution of gas between markets has generally been considered uneconomical.
As a result, there are currently no pipeline interconnections among the three markets, so Australia’s
gas production is either consumed within each market or exported as LNG (Map 2.3).

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Map 2.3 Natural gas infrastructure in Australia
Note: FLNG = floating liquefied natural gas.
Figure 2.11 Australia’s LNG exports by country, 1993-2016

bcm
70
60
50 Others
40 China
30 Korea
20 Japan
10
0
Sources: LNG export volumes from 1993 to 2015: IEA (2017b), Natural Gas Information (database), www.iea.org/statistics/; LNG export
volumes in 2016: GIIGNL (2017), The LNG Industry GIIGNL Annual Report 2017.
Australian gas reserves are significant at 3 700 bcm, but much is offshore, remote or otherwise
stranded. Beginning in the 1960s, gas production, often as associated gas, was developed in the
major east coast markets (where most Australians live). The gas was sold on long-term, low and
stably priced wholesale contracts to domestic industries and users, plus utilities in some states.
Beginning in the 1980s, stranded gas reserves offshore western and northern Australia were

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developed for export via LNG. These reserves are remote, and physically quite separate from east
coast markets. There were no LNG exports from the east coast. By 2009, gas exports from Australia
were around 30 bcm, compared with domestic gas use of around 35 bcm, of which around 20 bcm
was consumed in the eastern states.
The existing gas market arrangements began to change in 2009-11, when commitments to build
seven additional large LNG plants were announced, with investments totalling more than
USD 150 billion. These plants started to progressively enter production in 2015, a process that will
continue until 2019 with contracted export volume set to increase to around 100 bcm in 2019. Japan
is the main importer of LNG from Australia, with annual imports of 30 bcm, accounting for 50% of
total exports in 2016 (Figure 2.11). China has also grown rapidly as an important market for Australia.
Box 2.1 Changing market dynamics in the eastern natural gas market in Australia
While many of the new LNG investments followed the historical model of developing stranded gas
offshore western and northern Australia, three plants are being built in Queensland, connecting the east
coast market with export markets for the first time. The three east coast export projects started in 2015
and are rapidly ramping up output, which almost triples gas demand in the region and creates a tight
supply market in the medium term. Besides sourcing gas from dedicated coalbed methane
developments, some of the LNG exporters in the eastern market are also sourcing conventional reserves
that otherwise would be available to domestic consumers. This is occurring at the same time as a
number of the legacy gas contracts for domestic supply have come to the end of their lifetimes, and gas
is increasingly being valued in the power market for its flexibility as rising shares of renewables
penetrate power markets. In Western Australia, the state government obliges gas exporters to reserve a
tranche of supply for the domestic market (around 15%), but no such arrangement existed in the east
coast market.
Australia exports LNG mainly through long-term oil-indexed contracts, and the dramatic drop in oil
prices in 2014 and increased supply of natural gas globally have led to a decline in Japan’s LNG import
prices by over 50% from November 2014 to the same month in 2016 (Figure 2.12). This price drop for
LNG has not held back Australia’s domestic prices on the east coast markets; on the contrary, wholesale
prices have more than doubled since early 2015. Most customers purchase gas under gas supply
agreements (GSAs). The GSA is a bilateral agreement between purchaser and wholesale suppliers,
stating an agreed price over a set term. Because contracts are usually confidential between the parties,
the Australian gas markets have to deal with a marked lack of price transparency. As long-term GSA
contracts have started to expire, domestic gas consumers in industry who were used to stable and low
prices find themselves left with shorter-term and more expensive contracts.
Gas in the east coast markets is now priced off LNG export prices; with volatile supplies and prices, this
affects industry and power users. Increased demand from LNG plants in the eastern gas region led to
wholesale prices growing by over 50% from 2010 to 2015, after a long period of low and stable prices. East
coast LNG exports started in 2015, but gas producers began to sign supply contracts from around 2010,
which has led to a continuous wholesale price increase since then. In 2015, the average wholesale gas price
for large industrial customers (consuming over 1 petajoule per year, or equivalent to around 25 million cubic
3
metres [Mm ] per year) on the east coast of Australia was 8.5 Australian dollars (AUD) per MBtu
(USD 6.4/MBtu), an increase of more than 60% from just over AUD 5/MBtu in 2010 (Oakley Greenwood,
2016). Some buyers have seen similar or even larger increases over shorter time frames.
Exposure to international gas prices on the domestic market is a natural consequence of opening up an
export market, as price arbitrage between LNG export markets and the domestic market emerges.

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Australian wholesale prices have at times, however, been above Australia’s LNG export prices, which
indicate market failure, notably a lack of competition and transparency in the Australian market. Around
80% of Australia’s gas pipelines are not regulated, and the market lacks transparency and competition in
terms of volumes and pipeline utilisation, in particular in the network linking production sites in the
south and the LNG terminals in the east. Monopolies in the network and high domestic transportation
costs contribute to making LNG exports more lucrative for gas companies on the eastern market.
Figure 2.12 Gas prices in Australia’s eastern region and LNG prices, 2010-16
USD/MBtu AUD/MBtu
25 50 Average wholesale
gas prices
20 40
Australia LNG FOB
15 30 prices
10 20 Japan LNG contract
5 10
Average retail gas
0 0 prices (right axis)
Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2010 2011 2012 2013 2014 2015 2016
Note: The trading hubs represent only a small share of the total gas sold on the domestic market, as most large consumers buy gas on
long-term contracts, but nevertheless provide an indication of the domestic price development.
Sources: Wholesale prices: IEA analysis based on Australian Energy Regulator (2017); Australia LNG free on board (FOB) prices: ICIS
(2017), ICIS LNG Edge; Japan LNG contract: Bloomberg Finance LP; Retail gas prices: IEA analysis based on St Vincent de Paul Society
and Alviss Consulting (2016), The NEM – A Hazy Retail Maze.
The situation has been exacerbated by restrictions on both unconventional and conventional gas by
some state governments in the east coast market, denying one of the LNG developers a potential supply
source for that market. These restrictions on onshore gas development imposed at the state and
territory level, and increases to the marginal cost of production from more unconventional
developments, are placing pressure on gas supply and prices.
Increasingly higher demand for LNG is tightening the domestic natural gas market for industries and the
power sector, where gas will need to play a critical role as renewable power increases and coal power
plants close. Among the southeastern states, South Australia is most reliant on natural gas in electricity
generation, where gas accounted for 53% of local power generation as recently as 2012/13.* The rapid
change in the power mix, plus the rising price of gas, saw this share fall to 38% two years later. Brown
coal, which had been falling steadily to below one-sixth of the power mix, increased somewhat to 20%
in 2014/15. The major factor in driving down gas-fired power has been the rapid rise in wind and solar
photovoltaic, more than doubling in the last five years to more than 40% of power from 15% in 2009-10
(Australian Government, 2016).
Building new infrastructure can improve the market situation in the longer term. New transmission
pipelines are being planned in Australia, including a connection between the eastern and northern gas
regions. This connection, if completed, would assist in reducing supply constraints in the eastern
market, stimulate competition and enable increased gas production in the northern region. In the
medium term, however, the Australian government is considering other market measures.
Under the umbrella of the Council of Australian Governments (COAG) Energy Council, regulators and gas
producers are working to implement measures to improve gas market operations (including the creation

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of the Wallumbilla Gas Supply Hub) and security of supply for domestic customers. With a view to
speeding up reforms and addressing the market failures outlined above, in April 2017, the federal
government announced a major new policy mechanism for gas security which started on 1 July 2017.
* Australian data are presented in fiscal years, ending 30 June.
Non-OECD Supply
China
During the forecast period, domestic production will grow annually at a rate of 6.6%, increasing from
around 140 bcm to 200 bcm. Shale gas production is expected to play a major role in this growth;
however, uncertainties in this forecast are related to a difficult geology and strong competition from
LNG or pipeline import options, which could turn out to be economically more feasible.
In 2016, the efforts of Chinese national oil and gas companies remained concentrated on reducing
capital expenditures and increasing profitability of their exploration and production activities. As a
consequence, domestic production in 2016 grew by only a meagre 1.7% y-o-y, from around 135 bcm
to 137 bcm. In contrast, imports grew by around 30% y-o-y, from around 60 bcm to 75 bcm,
increasing China’s import dependency from around 30% to 35%. LNG imports grew faster than
pipeline, representing around 65% of the total import increase. Still, it was another year where
demand fell short in absorbing the current contracted LNG import potential of around 60 bcm.
The 13th FYP for natural gas, presented in January 2017, creates political support to raise China’s gas
supply portfolio: it should amount to around 365 bcm in 2020, of which around 210 bcm, or roughly
60%, is supplied by domestic production. Based on 2016 domestic production levels (137 bcm) this
means an annual average growth rate of 11% until 2020. China’s National Energy Administration has
targeted 2017 gas output of 170 bcm, almost a quarter higher than 2016 (Reuters, 2017). Supporting
this target, investment levels of national oil and gas companies are increasing again in 2017 after
they suffered from low prices during the past two years: China National Petroleum Corporation
(CNPC), the number one domestic gas producer in China (with a share of around 72% of domestic in
2016) reports a significant increase in investment (from around USD 1.2 billion to USD 2.9 billion) to
further develop the Chongqing field (Ordos Basin) and USD 1.5 billion (from USD 0.75 billion) for
exploration activities in the Tarim Basin. However, CNPC has not issued updated production targets
yet. Sinopec also plans to increase investments for developing natural gas, specifically in northern
Hubei, western Sichuan province and shallow-water Bohai Bay, reaching about 5 bcm per year of gas
production capacity.
Despite political support, various barriers exist that could affect an increase in China’s domestic
production. China’s onshore fields are a challenging terrain, as many of China’s gas fields are deeper
than, for instance, in North America, resulting in higher upstream cost. Besides the difficult geology,
major basins such as the Sichuan Basin face further hurdles: although the cost to drill in this region
fell by about 23% between 2013 and 2015 (EIA, 2015), it is also densely populated and heavily
cultivated, affecting the pace of incremental gas production growth. In the latest plan, shale gas
targets have already been substantially downgraded to 30 bcm from the formerly envisaged 60 bcm
to 100 bcm. Furthermore, shale gas producers face declining support; while subsidies have been
extended, they will be decreased step by step.

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Map 2.4 China’s gas supply sources, 2016
Sources: LNG imports from ICIS (2017), ICIS LNG Edge (database).
Note: PNG = Papua New Guinea.
Pipeline and LNG imports are already available options, which could turn out to be strong
competitors for domestic production. Recently, policy makers pushed competitiveness for natural
gas imported to China: as of 1 July, value-added tax (VAT) will be down to 11% (from 13%), which is
good news for LNG producers looking for pockets of demand against the background of an
increasingly well-supplied LNG market. It remains uncertain if the United States can benefit from this
development as the US Department of Commerce encouraged China to receive US LNG and imports
(DOC, 2017), but Qatar and Australia remain strong competitors for this market. An increase in gas
supplies should be aligned with political efforts to reform the gas market in China to allocate gas
supplies efficiently: in particular, the midstream business needs to be reformed: currently it is
characterised by non-transparent pipeline tariffs, a lack of third-party access for pipeline
infrastructure, and inadequate storage capacity in relation to the increasing need for winter load in
the northern provinces.
Box 2.2 Recent pricing reforms for domestic production

During the last decade, several countries switched to market-based approaches in pricing their domestic
production, moving away from regulated pricing. Worldwide, around three-quarters of natural gas is
consumed in the country where it is produced, and around half of global domestically consumed

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volumes are still subject to regulated prices. In Europe and North America, most domestically consumed
gas is market-priced, with systems based on gas-to-gas competition gaining ground over oil-linked
pricing in recent years. In Africa, the FSU and the Middle East, most production is still traded at
regulated prices. In recent years, India and China, two of Asia’s biggest gas markets, shifted towards
market-based approaches for their domestic production.
Almost all cross-border flows are market-priced, based on either gas-to-gas competition or in reference
to alternative fuels, most commonly crude oil and oil products. Oil-linked pricing dominates LNG trade,
as it is used in most long-term import contracts in the Asia and Pacific region. Mechanisms based on gas-
to-gas competition have increased their share in this market segment with the development of spot LNG
trading, and in long-term import contracts from North America and into some European markets.
Pipeline trade saw similar developments, as several European importers moved away from oil-linked
pricing. In Asia and the FSU, oil-linked pricing is the main system.
Regulated wellhead prices are often low and lead to a lack of upstream investment. At a time when
cross-border trade is increasing in several regions, market-priced imports are influencing how and at
what level domestic production is priced. This is especially so in countries where subsidised domestic
production has to be complemented with imports to meet demand, as the gap between price levels
creates economic challenges for governments and industry actors. In systems where imports are sold
domestically at below-market prices, governments often switch to market-based systems as a way to
reduce subsidy spending. Following is analysis of some elements of the price formation in four
countries, showing the different regional mechanisms and dynamics.
Implementing market-based pricing does not necessarily translate to the price levels necessary to boost
domestic exploration and production spending, often one of the main goals of pricing reforms. As gas is
a highly regionalised commodity, efficient market design should reflect supply-and-demand dynamics
that are specific to each market. Therefore, price formation logic plays a key role in efficient market
design. China reformed its method of pricing indigenous production in 2013 and India did the same in
2014. By doing so, an additional annual production of around 160 bcm (in 2014) shifted away from
regulated prices towards market-based mechanisms.
Despite an average annual growth of 7% between 2010 and 2015, domestic natural gas production in
China was unable to meet rapidly expanding demand. During this period, imports increased their share
in the country’s supply from around 15% to 30%. Natural gas in China has traditionally been subject to
regulated prices at several stages of its value chain, from wellhead to end use. Until the 2013 reform,
city gate prices were based on domestic production on a basis of cost plus profit margin. This system
failed to reflect rising demand dynamics and resulted in economic losses for suppliers, which had to
resell expensive imports at lower local prices to meet growing demand. Consequently, natural gas
imports were discouraged, which led to supply shortages in several cities.
After a two-year trial in Guangdong and Guangxi provinces, China launched a new pricing approach for
onshore piped gas, linking it to import costs of oil products. By 1 April 2015, most provinces had
transitioned to a system of city gate price ceilings linked to the Shanghai city gate price, which is a
function of liquefied petroleum gas and fuel oil import prices, plus transmission costs. The Shanghai city
gate price calculation also involves a fixed discount rate to promote natural gas use, giving the Chinese
government a tool to influence the market. Prices for LNG, offshore fields and unconventional natural
gas are not subject to city gate prices and can be independently negotiated between the parties. Due to
the high consumption of gas and its key role in the Chinese energy landscape, the Shanghai city gate
price is expected to be the basis for the future development of a domestic natural gas trading hub.
India’s indigenous natural gas production declined from its 51 bcm peak in 2010 due to natural
depletion of existing blocks and a lack of new discoveries. As domestic output declined, India’s reliance
on LNG imports, because of the absence of import pipelines, grew steadily from 20% in 2010 to around
35% in 2015. After an attempt to boost investment in 2010, when regulated wellhead prices were

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doubled to USD 4.2/MBtu, India moved away from regulated prices in November 2014 and switched to
market pricing based on gas-to-gas competition. The 2014 reform was expected to translate into higher
price levels, which would boost investment in the sector and domestic production, particularly from
offshore fields, needing prices over USD 8/MBtu to be developed.
Figure 2.13 Average China city gate price, 2007-16
USD/MBtu
12
10
8
Domestic
6 natural gas price
0
Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16
Source: MIT (2015), Natural Gas Pricing Reform in China: Getting Closer to a Market System?
https://globalchange.mit.edu/sites/default/files/MITJPSPGC_Rpt282_2.pdf.
The new pricing mechanism failed to produce sufficiently high price levels, which decreased from
USD 5.05/MBtu at the time of its introduction to USD 2.50/MBtu in October 2016. The changes reflected
the price movements in the international references used in the calculation, which include Henry Hub
(United States) and National Balancing Point (NBP) (United Kingdom), as well as a heavily regulated
Russian Federation price benchmark. Local supply-and-demand dynamics were not reflected in the price
formation mechanism. In April 2016, a new price ceiling mechanism was introduced for incremental
production from deepwater (DW), ultra-deepwater (UDW) and high-pressure/high-temperature (HP-HT)
fields. These new price ceilings are a function of import prices for alternative fuels, effectively
implementing an oil-linked pricing mechanism.
Natural gas demand in Argentina and Saudi Arabia has increased significantly in the last decade and is
expected to continue growing. Both countries decided to increase wellhead prices for their domestic
production in order to boost investment, but decided against transitioning to market-based pricing
models.
Argentina, where a functional market-based pricing mechanism based on gas-to-gas competition
operated in the late 1990s, implemented measures to increase wellhead prices without reforming the
system of mainly regulated end-use prices that was introduced after the 2002 financial crisis. Low
wellhead prices and lower end-use prices in the country prevented upstream investment as demand
grew, turning a natural gas exporter into a net importer with a rapidly widening supply deficit.
In 2013, Argentina launched what came to be known as Plan Gas, an incentive programme in which
participants receive a fixed price of USD 7.5/MBtu for any incremental natural gas production. This
price level will be valid until the end of 2017 and will decrease to USD 7.0/MBtu in 2018 and
USD 6.5/MBtu in 2019. In March 2017, the country launched a similar programme specifically
targeting unconventional gas from the Neuquén Basin, where the Vaca Muerta play is located.
Participating producers will be guaranteed a price of USD 7.5/MBtu for 2017, which will be

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gradually reduced to USD 6.0/MBtu in 2021. Domestic production in Argentina has reversed its
decline, production grew by 3.5 bcm between 2014 and 2016.
Figure 2.14 Wellhead prices for Indian production, 2014-17

USD/MBtu
7
Domestic price for
6 DW/UDW/HP-HT
production
5
2 Domestic natural gas

price
1
0
Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17
Source : Ministry of Petroleum & Natural Gas, Government of India (2017), Domestic natural gas prices (database), www.
ppac.org.in/content/155_1_GasPrices.aspx.
In parallel, end-use prices are set to rise gradually, with the reference wellhead prices for residential
tariffs following a converging trajectory with the projected average wholesale price for domestic
production. This could create a price environment in which market-based price formation mechanisms
could be reinstated in South America’s largest natural gas market.
Saudi Arabia’s plan to boost the role of natural gas in its energy mix while continuing to diversify its
economy creates opposite pressures on its regulated natural gas prices, which had been set at around
USD 0.75/MBtu until 2015. On the one hand, the country needs to boost output and therefore improve
project economics by increasing the prevailing price levels, particularly if the kingdom’s sizeable
unconventional natural gas resources are to be developed to meet demand. On the other hand, Saudi
Arabia needs cheap natural gas to support its growing petrochemical industry. In January 2016, the
government increased the price of domestic natural gas to USD 1.25/MBtu and established an ethane
price of USD 1.75/MBtu, mainly for use in the petrochemical sector. Saudi Arabia opted for fixed
regulated pricing subject to revisions, reportedly prioritising price stability over market-based pricing
approaches.
Asia (non-OECD)
Despite a strong increase in gas demand, gas production in non-OECD Asia is forecast to remain broadly
stagnant in aggregate, declining at an annual average of 1.2% between 2016 and 2022, compared with
an average yearly increase of 0.2% over the prior six years. On the positive side, Indian gas output is
expected to stabilise after having fallen by almost 20 bcm since 2010 and Malaysia will also have stable
gas production. On the negative side, gas production in other big non-OECD Asia producers, such as
Indonesia, Pakistan and Thailand, show large decreases together totalling 25 bcm. These decreases
occur mainly because of depletion of current gas fields and slow investments in the low gas price
environment. Other regional producers generally show small output changes. Myanmar remains a
bright spot, with exploration activity progressing despite low prices (Figure 2.15).

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Figure 2.15 Non-OECD Asia gas supply by country, 2002-22

400 bcm 15
350 10
300 5
250 0
200 -5
150 - 10
100 - 15
50 - 20
0 - 25
2002 2007 2012 2017 2022 2010-16 2016-22
Indonesia Malaysia Pakistan India Indonesia Malaysia Pakistan India

Thailand Bangladesh Myanmar Others Thailand Bangladesh Myanmar Others
India
Gas production in India will stagnate over the forecast period, remaining at a level of around 30 bcm
by 2022. In the period 2010-16, output declined by an annual average of 9%, collapsing from 51 bcm
to around 30 bcm last year. In 2010, 80% of total consumption was covered by domestic production;
by 2022 only 40% of domestic needs will be satisfied by gas produced in India, leading to an
increasing dependency on gas imports.
In an effort to revitalise the upstream sector, the government has introduced several measures
liberalising natural gas prices for gas produced from deep sea, ultra-deep sea, high-pressure and
high-temperature reservoirs. The aim is to encourage investment of USD 20 billion for the
development of domestic gas fields during the next five to seven years. Until now, domestic
production has taken place in the western and southern regions of the country, and with a lack of
adequate pipeline infrastructure, large parts of the country have been excluded from gas supplies.
The new investment policy will focus on deep-sea gas fields off the eastern coast. However, the fall
of gas prices worldwide has pushed domestic gas prices in India down, so for many companies they
are below the cost of production, discouraging new gas development projects.
Because well-supplied gas markets worldwide will keep gas prices under pressure, it will remain
difficult for India to mobilise the needed capital to increase domestic gas output. At the same time,
natural gas production will continue be affected by the natural decline in some of the fields,
underperformance of wells, unpredictable off take by potential consumers and the absence of
adequate natural gas pipeline infrastructure in some regions. The mix of all these elements will likely
keep natural gas production relatively flat until the end of the forecast period.
Indonesia
The forecast for Indonesian natural gas production is lower compared to last year’s report.
Production is expected to continue declining at an average rate of 2.1% from around 80 bcm in 2016
to around 70 bcm in 2022. Factors pushing production downward are the decline in fields and a lack
of new discoveries, the aim of the government to strengthen the market positioning of the state-
owned company Pertamina and reduce the role of international oil companies (IOCs) in the upstream
sector, and the decision of the government to stop reimbursing investors for their exploration and
production activities. One of the measures to strengthen the position of Pertamina in the upstream
sector will be the transfer of the operation of producing blocks to the state-owned company, after
the concessions of the blocks in hands of private operators expire by 2018.

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Malaysia
After reaching a production peak in 2014 of 70 bcm and experiencing a decline during the last two years,
Malaysia seems to be finding the way to maintain the production level. This report forecasts that
production will increase slightly by 2 bcm to around 70 bcm by 2022, showing an average annual growth
rate of 0.4% over the forecast period. Malaysia introduced measures in 2011 to reverse declining
production trends, by reducing the petroleum tax and increasing reimbursements for initial investments.
The measures to stimulate gas production also paved the way to monetise stranded gas fields.
At the end of 2016, Malaysia achieved an industrial milestone with the first FLNG facility in the world,
starting production from the offshore field Kanowit. With this industrial innovation, the state-owned
company Petronas is able to produce, liquefy, store and offload on the same facility. This year the
first cargo was delivered, demonstrating that gas reserves from remote deepwater and stranded
fields, where the larger resources of the country are now located, are commercially viable.
FSU and Europe (non-OECD)

Production from the FSU and non-OECD Europe is forecast to increase by an average of 1.5% per
year, reaching almost 950 bcm in 2022. This production increase is driven by growing exports to
China from Turkmenistan, Russia, Kazakhstan and Uzbekistan, increasing Azerbaijan exports to
OECD Europe and the ramp-up of Yamal LNG in Russia.
Figure 2.16 FSU and non-OECD Europe gas supply by country, 2002-22
1 000 bcm 60
800
40
600
20
400
200 0
0 - 20
2002 2007 2012 2017 2022 2010-16 2016-22
Russia Caspian region Others Russia Caspian region
Following the change from falling production after 2013 to production growth in 2016, Russian
production is expected to grow in the second half of the forecast period when export projects for
LNG and pipeline exports begin to ramp up. However, the regional production outlook is particularly
sensitive to international market developments as described in Chapter 3. Any unexpected increase
in global demand would likely trigger a large supply response from the region given the ample spare
capacity available in the Russian upstream system.
Russia
Russian gas production increased to around 645 bcm in 2016 and is expected to reach almost
685 bcm by 2022, following the commissioning of fields serving the Yamal LNG train and the
progressive ramp-up of the Power of Siberia pipeline export system. A significant amount of the

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production increase in 2017 and 2018 is attributed to compensate for the high Russian storage
withdrawals in 2016 which was used to meet the increased domestic demand and exports.
While Novatek posted a slight decline in production, Rosneft increased output by 5 bcm to 67 bcm.
Both of these companies will continue to increase production in the medium term, while Gazprom’s
production is expected to stay flat at around 410 bcm. Gazprom’s share of Russia’s total gas
production is thus expected to continue to decline slightly from the current 63% to around 60%.
Production in Gazprom’s legacy fields – Yamburg, Orenburg, Zapolarnoye – still represents over 35%
of the country’s total production, yet they are progressively declining. The Bovanenkovo field,
opened in 2012, is continuing to ramp up, reaching 67 bcm in 2016 and partly offsetting these
declines. Maximum daily output from the field is now 264 Mm3 per day, which is essential to
supplying gas for the planned Nord Stream 2 pipeline project. The field, with the potential to plateau
at 115 bcm/year, makes it Russia’s largest producing field. This confirms the Yamal peninsula as a key
gas production centre in Russia.
Caspian region
Caspian gas production is expected to increase by about 40 bcm up to 2022. Turkmenistan exports to
China over 2016-22 have been revised down significantly as line D from the Central Asia–China
pipeline has been suspended. Azeri production is set to increase by 12 bcm by 2022, supplying
Turkey and Europe.
The speed of the expansion of Caspian gas production will largely depend on China’s demand
requirements and the development of new markets for Turkmen gas, which is not expected within the
time frame of this report. Difficulty in financing and the Afghanistan security situation are hindering
progress on the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline. Progress on the Trans-
Caspian pipeline to export Turkmen gas to Europe via Azerbaijan has yet to be realised. Moreover,
Russian imports from Turkmenistan have stopped since the beginning of 2016, leaving China and Iran
as the country’s only export markets. Due to the gas contract disputes between Azerbaijan and Iran
that started in 2016, it seems unlikely that gas exports to Iran will increase in the future.
At the time of writing, Azerbaijan’s Shah Deniz Phase 2 field development is 90% complete, and the
expansion of the South Caucasus Pipeline capacity is 93% complete (BP, 2017). The project timeline
aims at a mid-2018 production ramp-up to first export gas to Turkey and later, by 2020, to Europe.
Shah Deniz Phase 3, Azerbaijan’s other big offshore reserve, is unlikely to be commissioned before
2022 given the continuing low price environment for oil and gas. A final investment decision (FID) on
Absheron field development is expected to be taken by Total towards the end of 2017, and the
preliminary timeline aims at a 1.5 bcm production start by 2019-20.
Middle East
This report raises the forecast for gas production in the Middle East to account for higher output
of dry gas mainly from Iran, Saudi Arabia and Qatar. The output is projected to grow by 1.8% on
average, up from around 580 bcm in 2016 to 650 bcm at the end of the outlook period. These
three countries will account for around 75% of the incremental gas production in the Middle
East. In the case of Saudi Arabia, a significant percentage of the production is associated gas and
therefore will fluctuate with the level of oil production.
Iran will account for the largest increase in production during the next five years, retaining its
position as the biggest gas producer in the Middle East even though its gas exports remain negligible.

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The development of the southern sector of Qatar’s North Field is not expected to make an impact on
the Middle East’s supply forecast of this report. Qatar Petroleum (QP) announced in April 2017 that it
would lift a moratorium in place since 2005 on further development of its offshore North Field.
According to QP, this could result in the addition of 20 bcm per year of gas production. However, first
gas is likely to come sometime in 2023 or later given the time needed to drill, produce and tie in new
production facilities to onshore infrastructure. The only increase from Qatar forecast in this report
will come from the Barzan field.
Figure 2.17 Middle East gas supply by country, 2002-22

700 60
600 50
500
40
400
30
300
200 20
100 10
0 0
2002 2007 2012 2017 2022 2010-16 2016-22
Iran Saudi Arabia UAE Qatar Oman Other Iran Saudi Arabia Qatar
Note: UAE = United Arab Emirates.
Further increases in the Middle East are expected to come from Iraq, where a gas gathering
and utilisation project in the south is capturing gas that was otherwise flared. And in the
United Arab Emirates, a country where the hydrocarbon industry is a pillar of the economy, the
government is boosting production of gas to satisfy increasing domestic energy demand.
Iran
The outlook for Iran’s gas production has improved since the Medium-Term Gas Market Report 2016
(IEA, 2016b). This year’s report expects average growth of 2.9% per year, leading to production of
almost 225 bcm by 2022, an increase of 36 bcm. Iran’s economic prospects have been enhanced
since most international sanctions imposed over its nuclear programme were lifted in January 2016 –
US sanctions, however, remain in place. International oil and gas companies are now considering
returning to Iran, though most are exercising caution. With 34 trillion cubic metres (tcm) of gas
reserves, the world’s second-largest conventional gas reserves, the government has offered up oil
and gas acreage for foreign investment under a new contract model that replaced the unpopular
buy-back scheme. In July 2017, France’s Total became the first Western oil major to sign an
agreement with Iran to develop phase 11 of the South Pars field. The project will have a production
capacity of around 20 bcm per year, and the gas will go into the Iranian gas network for domestic
use. Under the terms of the agreement, Total will operate the project with a 50.1% interest alongside
Petropars (19.9%), a 100% subsidiary of NIOC, and the Chinese state-owned oil and gas company
CNPC (30%). Royal Dutch Shell also signed a memorandum of understanding with NIOC in December
2016 to explore areas of co-operation in oil and gas development. However, Shell has not finalised
the preliminary agreements with Iran as yet.

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Map 2.5 South Pars and the North Field
In total, there are an estimated 4.5 tcm of undeveloped gas discoveries in Iran, including the
undeveloped phases of South Pars, the North Pars and a number of other fields. However, it is
unlikely that any of the remaining fields other than some phases of South Pars will produce any gas
during the forecast period. NIOC is pressing ahead with further expansion of South Pars; 18 of the
planned 24 phases have been fully or partially developed.
The additional gas volumes are allocated mainly for the electricity sector and industry, though a large
volume is used for reinjection into oil fields for enhanced oil recovery. Volumes of gas for reinjection
are expected to rise in the future as Iran prioritises increasing oil production in order to maximise
revenues as it recovers from the restrictive sanctions and to prevent further declines from its older
oilfields. While exact volumes of reinjected gas are not available, Iran is estimated to have injected
28 bcm annually for the purpose of secondary oil recovery since 2010.
Qatar
Qatar has an estimated 25 tcm of gas reserves, 14% of the world total. The small peninsula has the
third-largest conventional gas reserves after Russia and Iran, nearly all of which are located in the
offshore North Field, part of a structure that extends into Iran, where it is known as South Pars. The
field is the world’s largest non-associated gas deposit. Although an oil-producing member of the
Organization of the Petroleum Exporting Countries (OPEC), Qatar early on recognised the value of
developing its natural gas reserves and set itself a target of producing 100 bcm per year of LNG,

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which it achieved at the end of 2010. In 2005, QP, concerned about the impact of rapid development
on the North Field’s reservoirs, declared a moratorium on further development of the offshore field.
Qatari officials said repeatedly in subsequent years that there were no plans to lift the moratorium.
Yet in a surprise move, in April 2017 QP announced that the moratorium would be lifted to allow
exploitation of the hitherto untapped southern sector of the field, with the aim of producing at least
20 bcm of gas within the next five to seven years. QP has said that it has not yet decided whether the
extra gas will be exported as LNG or as other products. The assumption adopted by this report,
before the announcement of the lifting of the moratorium, was that Qatari production would slightly
grow by 0.4% per year over the outlook period due to the start-up of the Barzan gas project, which
received the green light just before the moratorium was declared.
Barzan, which is owned 93% by QP and the remainder by ExxonMobil, will produce around 20 bcm
per year of gas when all phases are operating, originally scheduled for completion by 2020. Barzan
gas is slated to supply the power and water sectors and to satisfy higher anticipated domestic
demand for energy to support construction of new facilities needed to host the Fédération
Internationale de Football Association (FIFA) World Cup in 2022. Because of the moratorium, Qatari
gas production had reached a plateau and was due to decline. Barzan, which was expected to come
on line in late 2016 but was delayed and ran over budget, will help offset some of the decline.
Without taking account of any additions to come from the southern sector of the North Field that is
yet to be developed, this report expects Qatar’s production to rise during the coming years to around
175 bcm and stay at that level until 2022.
Saudi Arabia
Saudi Arabia has in recent years stepped up the effort to produce and process more gas as demand
growth outstripped supply due in large part to generous consumption subsidies. This report forecasts
a growth rate of 1.8% per year in gas supply, though that may not be enough to satisfy the ambitious
targets set out in the National Transformation Program (NTP 2020), a sweeping reform plan that
extends to Saudi political, social and economic structures. Energy is at the heart of these reforms,
with gas taking an increasingly central role in order to meet anticipated higher demand by the power
and industrial sectors. By 2022, the country is expected to produce around 100 bcm per year.
Since early 2016, Saudi Arabia has lowered its crude oil production to comply with an OPEC supply
cut, which has the Kingdom shouldering the bulk of the reduction. This will impact the volumes of
associated gas produced, which in 2015 accounted for one-third of total gas output.
Increments in gas production will depend on the success of stepped-up exploration efforts by Saudi
Aramco. Recent exploration has resulted in new oil and gas discoveries – the two gas discoveries are
onshore – but it is not yet known when these will be developed. Recent rig counts show a record
number of gas drilling rigs operating in the kingdom. The challenge will be to increase output in new
gas fields with a complicated geology requiring higher costs for development. Gas exploration efforts
in the Red Sea have so far not yielded any results.
Saudi Aramco is currently in discussions with several international oil companies about potential
joint investments in gas projects both in Saudi Arabia and abroad, with a view to increase gas
output rapidly. This would not be the first time that Saudi Aramco has opened up its upstream
gas sector to foreign investors, though its Saudi Gas Initiative launched in 2001 did not result in
new gas developments because of poor economics.

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Africa
The outlook for total gas production in Africa is little changed from last year’s report. This report
expects an increase of 2.7% on average until 2022. The majority of the natural gas volumes are
produced in Algeria, Egypt and Nigeria, representing around 85% of the total production of the
continent. This report forecasts that at the end of the outlook period, around 70% of the production
growth in the continent will take place in Egypt, coming from the Zohr field and the East and West
Delta. Despite the declining trend seen in major maturing fields, Algeria, as the main gas producer of
Africa, should be able to stabilise its output by bringing new fields into production.
Figure 2.18 Africa gas supply by country, 2002-22

250 30
200 20
150 10
100 0
50 - 10
0 - 20
2002 2007 2012 2017 2022 2010-16 2016-22
Algeria Egypt Nigeria Libya Others Algeria Egypt
Other parts of Africa will add minimal new volumes to the total output of the continent. Due to
unfavourable market conditions, some projects and FIDs such as the LNG export plant at the
southern coast of Cameroon have been postponed, except for the Coral South floating liquefaction
project off the coast of Mozambique which took FID in June 2017.
Algeria
This report expects an annual average growth rate of gas production of 0.4% over the forecast
period, growing from around 90 bcm in 2016 to around 95 bcm in 2022. In the short term, gas output
will temporarily ramp up as a result of the start-up of Southern Fields projects such as Touat,
Timimoun and Reggane. All three projects have been executed in partnership with IOCs and will add
around 9 bcm to the country’s annual gas production. This modest increase implies that Algeria will
be able to put a halt to the declining gas output seen for almost a decade. This steady decrease has
been caused by declining mature fields, bureaucratic delays in the permitting process for the
development of new fields, lack of foreign investors, and technical and infrastructural constraints,
factors that will likely continue to affect gas production in the coming years.
Volumes produced from newly developed fields, as well as efforts to maintain a stable output from
existing fields, are for the most part needed to satisfy rising domestic demand in Algeria. In the
beginning of 2016, the expansion at the In Salah Southern Fields began with the aim of maintaining
current output levels of the fields. The project is a joint venture among Sonatrach, BP and Statoil and
involves the development of four dry gas fields: Gour Mahmoud, In Salah, Garet el Befinat and Hassi
Moumene. The state-owned company also awarded the Japanese company JGC Corporation a

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USD 1.4 billion contract to improve the capacity of the facilities of the ageing giant Hassi R’Mel field,
with the purpose of maintaining a production plateau. This field, the largest one in the country, is
responsible for half of the natural gas output of Algeria.
In July 2016, the new minister of energy forecast an increase in Algeria’s gas and oil production on
the order of 30% by 2020. Given the lack of interest by foreign investors as a result of the weak
business climate of the country and the restrictions for foreign investments, this target is likely
unrealistic. New gas fields will partly compensate for the losses due to the maturing fields and lack of
investments but won’t contribute to a substantial growth of the output of the country over the
forecast period.
Table 2.2 New gas field development in Algeria

Project Producers Volumes (bcm) Planned start
Touat Sonatrach, Engie 4.6 2017
Timimoun Sonatrach, Total, Cepsa 1.6 2017
Reggane North Sonatrach, Repsol, 2.9 2017
DEA, Edison
Isarene (Ain Tsila) Sonatrach, Petrotic, 3.6 2018
Enel
Tinhert Sonatrach 7 2018
Ahnet Sonatrach 4 2019
Hassi Mouina Sonatrach 1.4 2019
Hassi Ba Hamou Sonatrach 4.4 2019
Menzel Ledjmet Sonatrach 4.6 2019
Gassi Touil Sonatrach - 2019
Source: IEA compilation based on information from companies’ websites.
Egypt
Currently, several natural gas field projects are being developed in Egypt that together could restore
self-sufficiency towards the end of the forecast period. While the rest of the world has seen a
structural slowdown in investments by energy companies, with increasing demand, Egypt is
becoming one of the only countries able to attract multibillion-dollar investments in the upstream
gas sector.
Table 2.3 Major investments in gas projects in Egypt

Project Companies Investments Volumes Start production
Zohr ENI Initial investment 10 bcm First phase
USD 3.5 billion, total 2017
investments USD 6-
10 billion 8 bcm Second phase
2019
West Nile Delta BP USD 12 billion Maximum of 12 bcm 2017
East Nile Delta BP Unknown 3 bcm First phase
Atoll gas field 2018

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In 2016, several IOCs operating in Egypt introduced programmes to accelerate the development of
discovered fields. Among the new production schedules, the Italian major ENI aims to reach an
output of 10 bcm before 2017, coming from six subsea wells that will be connected via a gas pipeline
to the onshore plant at Port Said. Subsequently, another four wells will be added, increasing the
output of the Zohr field to 18 bcm by 2019. At the end of 2015, BP decided to accelerate activities in
Egypt, aiming to bring the offshore Atoll field in the East Nile Delta into production in the first half of
2018, three years after its discovery. In the first phase of the project, the company estimates it will
be able to produce 3 bcm per year.
Nigeria
In Nigeria, gas production will not expand at the rates required to support the needed increase in
generation capacity of the country and maintain the substantial LNG volumes based on obligations
agreed in long-term contracts. This report forecasts a further slight increase of gas production by
2022. At the end of the outlook period, Nigeria will produce around 40 bcm. In a country without any
security guarantee in the gas production region, international investors have been minimising any
commitments to new upstream activities. The lack of predictability in terms of fiscal and legislative
issues is still an important factor pushing down investments in the gas sector.
Latin America
Latin America’s gas production is expected to remain relatively flat over the forecast period,
producing around 175 bcm by 2022. Growth in Argentina, Brazil and Venezuela will be
counterbalanced by output declines in Bolivia, Colombia, Peru, and Trinidad and Tobago. The outlook
for Argentina and Brazil is promising and both are introducing market reforms that potentially might
deliver higher outputs. However, insufficient internal demand might be an obstacle. Both countries
need to overcome significant economic and fiscal difficulties to realise their respective growth plans.
Figure 2.19 Latin America gas supply by country, 2002-22

0 Change over period
bcm bcm
200 15
150 10
100 5
50 0
0 -5
2002 2007 2012 2017 2022 2010-16 2016-22
Argentina Trinidad and Tobago Venezuela
Argentina Brazil Bolivia Other
Brazil Bolivia Other
Argentina
According to this forecast, gas production will grow at a rate of 1.5% per year, reaching around
45 bcm by 2022. This stands in contrast to the 0.2% annual decline from 2010-16. The main growth
source will be production from unconventional gas, supported by stimulus programmes.

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Historical swings witnessed in domestic gas production are directly related to the political will of
governments and the economic momentum. The lack of investment in the upstream sector during
the two previous Kirchner administrations led to production declines of around 20%, and production
is still substantially lagging behind demand. Since 2012, a number of incentive programmes known as
Plan Gas I, II and III have been in place with the aim of stimulating domestic production. Although
these programmes do not directly target unconventional natural gas, they succeeded in stopping the
steep output decline during the last years of the former administration.
After the United States, Argentina probably has the most promising prospects for shale gas
production and globally ranks as the second-largest in shale gas resources behind China. The Vaca
Muerta field, located in the Neuquén Basin, is the second-largest shale gas resource in the world,
often compared with the Eagle Ford play. This field has caught the attention of the international
majors for its vast reserves in both oil and gas.
After long negotiations among the national and regional governments, the oil and gas companies,
and labour unions, a new scheme to further stimulate domestic production (particularly
unconventional gas) was agreed and released in January 2017. The central government has agreed to
extend Plan Gas I until 2019, keeping the warranty of a minimum wellhead price for volumes
produced beyond the previously fixed production levels. Producers who own concessions and are
willing to join the programme will have to obtain validation of their respective investment plans and
monthly output projections for each concession. The regional Neuquén government will not increase
production taxation and has pledged to invest in infrastructure in the region.
Under this scheme, a minimum wellhead price is warranted for unconventional gas production in the
Neuquén Basin until 2021.
Brazil
Production in Brazil has grown steadily over recent years, boosted by the associated gas in the pre-
salt oil fields. In 2016, the country produced around 25 bcm. At the end of the outlook period the
country will reach a production level of almost 30 bcm per year.
Supply in Brazil is mainly met by domestic production, with remaining needs met by pipe imports
from Bolivia under a long-term contract and finally from short-term LNG imports to balance power
supply in the absence of hydro. Domestic production is mainly located in the southeast, mostly
offshore and oil associated.

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3. TRADE
Highlights
• LNG liquefaction capacity is expected to grow by 160 bcm over the period to 2022, led by
the United States (90 bcm) and followed by Australia (30 bcm).
• The Former Soviet Union (FSU/non-OECD Europe) will remain the largest exporter,
primarily by pipelines, not only by exports to OECD Europe but also increasingly to The
People’s Republic of China (hereafter, “China”) towards the end of the forecast period.
• China led the 2016 global ranking of year-on-year (y-o-y) growth in LNG imports with
around 10 bcm. By 2022 China becomes the second largest importer of LNG.
• A group of new small LNG importers has grown significantly over the last few years. Egypt,
Jordan and Pakistan imported more than 18 bcm in 2016. By 2022 new and small players
will double the 2016 level and will account for 20% of global LNG trades.
• Ample availability of LNG is putting pressure on traditional ways of pricing and marketing
natural gas. This trend will further accelerate by the expansion of US exports, which are not
tied to any particular destination and are not oil indexed.
• The oversupplied markets continue discouraging new upstream investment. In 2016 only
two new final investment decisions (FIDs) were taken to expand existing or build new LNG
facilities and as of the time of writing, only one FID has been taken in 2017.
Global overview
• International gas trade has increased by more than 70% since 2000, going from around
620 bcm in 2000 to around 1 060 bcm in 2016 (Figure 3.1). Pipeline-traded gas has been
gradually losing share with the rapid development of global LNG trade. The share of traded
LNG will increase to approximately 38% of all traded gas in 2022.
• The second wave of LNG expansion is underway. Nearly 140 bcm of LNG capacity is under
construction, of which nearly 80 bcm originates in the US with another 30 bcm in Australia.
In this report, an additional 20 bcm of LNG capacity which has not yet got FID, is assumed to
come online by the end of the forecast period. In total, global LNG export capacity will reach
650 bcm by the end of 2022. Australia will have the largest LNG export capacity of almost
120 bcm per year, followed by the United States and Qatar, each with around 105 bcm
capacity. Together they will equal half of the global LNG export capacity.
• The 650 bcm of liquefaction capacity is much higher than expected LNG demand of around
460 bcm in 2022, so LNG markets remain well supplied throughout the period. Qatar,
Australia and the United States are expected to account for nearly 60% of the LNG supply in
2022.

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Figure 3.1 Relation between natural gas consumption in producing countries, pipeline and
LNG exports
bcm Share of trade

4 500 100%
4 000 23% 24%
31% 32%
3 500 80% 38%
3 000
2 500 60%
2 000
40% 77% 76%
1 500 69% 68%
62%
1 000 20%
500
0 0%
2000 2005 2010 2015 2022 2000 2005 2010 2015 2022
Natural Gas consumed locally by producing countries Pipeline exports LNG exports
• Much of the new capacity is being contracted by portfolio players. With the existing
contracts in place today, from 2019 to 2022, around 120 bcm on average are contracted
between portfolio players and importers annually.
• Chinese LNG imports grow by 41 bcm to 77 bcm by 2022. China becomes the second largest
importer of LNG. Pipeline gas imports from Myanmar, Uzbekistan, Turkmenistan, Kazakhstan
and Russia will increase by 27 bcm by 2022, partly driven by the Power of Siberia pipeline
ramp-up towards the end of the forecast period.
• Japan hit a turning point in 2016, when its LNG demand started to lag behind its contracted
LNG volumes. The gap between contracted volumes and imported volumes has been
reduced to reach a balance point in 2016 and, from 2017 onwards, the addition of new
contracts and a decreasing demand will result in a significant over-contracted position for the
first time. The surplus will peak in 2018, reaching around 25 bcm, and then gradually shrink
to around 5 bcm in 2022.
• Regasification capacity in India is increasing rapidly. By the end of 2016, India had four
operating LNG terminals with total capacity of 40 bcm. By 2019, five new LNG import
terminals, including three FSRUs, will come on line with total capacity of around 30 bcm.
• A group of new and small LNG importers has grown significantly over the last few years.
Egypt, Jordan and Pakistan started importing LNG from 2015 and imported more than
18 bcm in 2016, as much LNG as imported by the United Kingdom and France combined.
• One-third of additional LNG regasification capacity under construction is in new markets and
demand centres, such as Bahrain, Bangladesh, Ghana, Haiti, Namibia, Panama, the
Philippines and Uruguay. With floating storage regasification units (FSRUs) and small-scale
terminals becoming more popular, starting LNG imports is becoming a much faster and more
flexible process. More than half of these countries have installed floating infrastructures, and
these new players are taking advantage of lower gas prices and meeting their growing gas
demand quickly.

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• The mid-2020s could become a tighter market, as many planned LNG projects have been
pushed back amid falling prices and deteriorating market conditions. In 2016, only two new
FIDs were taken to expand existing or build new LNG facilities, with total nameplate capacity
of 8.6 bcm and as of the time of writing, only one FID has been taken in 2017.
• OECD Europe remains the largest import region, and China will take a sustained second place
by 2019-20, surpassing Japan over the forecast period (Figure 3.2).
Figure 3.2 Net import position per region and selected countries, 2016 and 2022
bcm FSU/non-OECD Europe
400 Middle East
300 Africa
200 Non-OECD Asia
100 Latin America
0 OECD Americas other
- 100
United States
- 200
China
- 300
Australia
- 400
2016 2022 Japan + Korea
OECD Europe
Note: Positive net import position equals net imports; a negative net import position equals net exports.
• The Former Soviet Union (FSU/non-OECD Europe) will remain the largest exporter, primarily
by pipelines, not only by exports to OECD Europe but also increasingly to China towards the
end of the forecast period. The Middle East will remain the second-largest net exporter,
predominantly due to its strong LNG export position.
• Russian exports to Europe reached a record high in 2016. Also in 2016, net imports and
production in OECD Europe were each almost 255 bcm and each equal to 50% of European
demand. By 2022 this ratio is expected to be 55% net imports and 45% production.
Competition among gas exporters to Europe is expected to become tougher in 2017 and
2018 with more US LNG coming on line.
Global gas trade

International gas trade has increased by more than 70% since 2000, growing from around 620 bcm in
2000 to around 1 060 bcm in 2016. Over this period the ratio between traded pipeline gas and LNG
changed substantially. Due to the rapid development of the LNG trade worldwide, pipeline gas
gradually is losing its share in the international trade. In 2000, only 23% of all internationally traded
volumes consisted of LNG. In 2016 this was around 33%, and by the end of the outlook period in
2022, the LNG share in the international trade will increase to approximately 38%, but cross-border
pipelines will remain the fixed arteries of international trade of natural gas. At a global level, around
30% of produced gas is traded internationally via pipeline or as LNG as described above, and around
70% is consumed in the country where it is produced. These shares have been relatively constant
over the years.

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Map 3.1 International pipeline and LNG traded volumes in 2015
Pipeline gas trade

For this report, international trade is defined as the gas flow from a producing country to a
consuming country. Transit volumes through a country that is neither the producer nor the consumer
are not regarded as trade. In a well-integrated international market such as Europe, traded volumes
are higher than the actual flow of produced gas to the consumer market. The definition above is not
in net terms but in gross terms. For example, the United States exports to Canada, and Canadian
exports to the United States are not cancelled out but treated separately.
Pipeline exports will continue expanding in absolute terms with an average annual growth rate of
around 1% over the outlook period, slower than the growth in LNG trade. In 2000, producing
countries exported over 500 bcm via pipelines. In 2022, around 750 bcm out of a total traded volume
of 1 170 bcm are expected to be cross-border traded through pipelines. All the major pipelines
together that will come on line, in combination with the projects that will reach peak capacity before
the end of the forecast period, mean that 100 bcm will be added to the pipeline gas trade worldwide,
reaching a total volume of approximately 750 bcm by 2022. Remarkably, the relatively large share of
pipeline gas trade together with the nearly 70% of natural gas locally consumed show that despite
the globalisation of many commodities during the last decades, natural gas is still largely a regional
commodity, including in its price mechanisms.
During the last decades, the gradual increase of the share of LNG in the international gas trade has
been pushed by the fast deployment of liquefaction and regasification capacity worldwide. In many
countries, the use of LNG has been expanding as an additional source to pipeline gas and as an
alternative source in countries with small markets where large-scale pipeline investments are not
feasible.
For large gas-importing countries such as those in Europe, pipeline gas is and will remain the
cornerstone of the gas system. The conversion of these systems to LNG as the only viable alternative

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for pipeline gas is an extremely costly option for these countries. For this kind of importer, LNG is
only an instrument of diversification of sources to supplement pipeline gas in case of shortages and
to mitigate the impact of possible disruptions to the pipeline gas supply. As a consequence, countries
with a dominant share of LNG in their gas mix are exceptional. Worldwide there are a limited number
of countries depending almost 100% on LNG imports for their gas supplies, such as Japan and Korea,
where cross-border pipeline infrastructures for imports are not available.
Bilateral energy relations

In most countries, national oil and gas companies own the gas transportation network and gas
reserves or have a strong role in the ownership structure, playing a prominent part in the
deployment of pipeline transportation capacity. In these cases, several major cross-border pipelines
projects are completely or partially policy driven, the result of direct investments by governments
and state-owned enterprises, in which governments define the framework for public or private
investments. Cross-border projects are mostly the subject of long-term negotiations, depending on
long-term bilateral relations. Because of the strong presence of the state, cross-border gas pipelines
are often considered to be vulnerable to disruptions and related to geopolitical interests. Even in a
region such as Latin America, where gas demand is modest, bilateral energy relations are largely
influenced by pipeline gas trade development, such as the case with the relations between the main
producer of South America, Bolivia, and its neighbours Brazil and Argentina.
In most of the regions, cross-border pipelines projects are linked to long-term contracts between
buyers and suppliers that contain obligations around the off-take of volumes and periodical reviews
of prices according to new market conditions. Concerning pricing mechanisms, in some regions such
as North America and some parts of Europe, long-term supply contracts for pipeline gas are based on
gas-to-gas competition, and hub-linked prices are the dominant arrangement. During the last decade
a strong trend emerged towards shorter gas import contracts driven by an increasing gas-to-gas
competition in many regions and a rising number of available supply sources. Nevertheless, contracts
for large infrastructure projects such as the Central Asian-China pipeline system to bring gas from
Turkmenistan to China, the Trans Adriatic Pipeline (TAP) to transport gas from Azerbaijan to Europe,
and large pipelines to bring gas from the United States to Mexico demonstrate that long-term
agreements are still needed to make those large initiatives feasible.
Over the forecast period, new pipeline-traded volumes will increase through the construction of new
projects and also through pipelines that have come on line during recent years. These projects will
reshape and add flow routes in several regions, intensifying or leading to new inter-dependencies
between gas-importing countries and their suppliers. In almost all continents, pipeline gas trade is an
important factor in the bilateral economic relationship between important regional players.
In 2016, Russia, Norway and Algeria ensured that they maintained their strategic position as pipeline
suppliers to the European market. Europe’s import needs are set to grow in the coming years, mainly
because of the continued decline in indigenous production. The new Southern Gas Corridor trade
route between Azerbaijan, Turkey and the European market is expected to start operation in the
next five years.

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New dynamics in the old European continent

A record high level of Russian exports to Europe
In 2016, Russia’s export volumes to OECD Europe increased by more than 12% to 170 bcm, a record
high level. The increase followed a combination of factors: low temperatures, lower production in
the Netherlands and lower (partly oil-indexed) contract prices than spot levels. The share of Russian
gas in OECD Europe’s gas mix went from 32% in 2015 to 34% last year.
Within Europe, Germany is the largest consumer of natural gas and is almost 90% dependent on gas
imports. Around 40-50% of gas demand of the country is covered by Russian pipeline gas. Of Russian
gas exports to Europe, around 30% is transported to Germany, approximately 45 bcm per year.
In 2016, Russia did not sell any gas directly to Ukraine, and all Ukrainian imports were supplied by
reverse flows from the European Union (EU). It is noteworthy that with higher exports to Western
Europe, Gazprom had to increase transit through Ukraine, which edged up 15 bcm to 83 bcm in 2016,
providing around USD 2 billion in revenues to Naftogaz (a record high amount when converted into
depreciated hryvnias).
In addition to Western Europe, Russia exports pipeline gas to the FSU countries as well as LNG.
Volumes exported to the FSU fell by around 7 bcm in 2016 to around 33 bcm, mostly reflecting the
decrease in exports to Ukraine. Overall, Russia’s total export volumes, including LNG, appear to have
increased y-o-y to around 225 bcm (an increase of around 7%), representing approximately one-fifth
of global gas trade via pipeline and LNG.
Competition among gas exporters to Europe is expected to become tougher in 2017 and 2018, with
more US and Australian LNG expected to come to global markets. US and Qatari companies are
believed to be able to export profitably at current hub price levels in Europe. Over the forecast
period Russia is expected to keep its strategic position as supplier of OECD Europe. Poland and
Turkey, which are large gas markets that have recently ramped up LNG import capacity, will be
interesting test cases. In response, Gazprom is looking to test markets, establish new gas selling
points and gain new customers through auctions (in 2015 and 2016, two auctions were conducted
for gas delivery in Germany and Austria and one auction for gas delivery in the Baltic States), develop
new markets such as small-scale LNG especially in the Baltic Sea region, and push for gas use in the
transportation sector. Gazprom established a dedicated company for this purpose, Gazprom NGV
Europe, in 2016.
Box 3.1 The OPAL pipeline and the European Commission’s inquiry into Gazprom
There are two major legal and regulatory cases that are expected to be solved in the coming two years
that could impact the European gas market and Russian gas supplies to Europe in the forecast period of
this report.
The first case is related to Gazprom’s utilisation of the gas transport capacity of the OPAL pipeline. OPAL
is a 472 kilometre (km), 36 bcm cross-border natural gas pipeline from the landfall point of the Nord
Stream Baltic Pipeline in Lubmin near Greifswald (Germany) to the end point near Brandov on the
German-Czech border. A small fraction of the transport capacity that is fully regulated also connects to
JAGAL and partly STEGAL, two gas pipelines owned by the German transmission system operator
Gascade. OPAL was commissioned in 2011 and is owned 80% by a joint venture between Wintershall
and Gazprom, and 20% indirectly by Uniper. The cross-border transport capacity of OPAL was fully

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exempted in 2009 from third-party access and tariff regulation provisions, given that this capacity
interconnects the German and Czech long-distance networks.
However, in July 2009 the European Commission (EC) requested the German regulatory authority, the
Federal Network Agency, Bundesnetzagentur (BNetzA), to impose restrictions on capacity bookings for
suppliers with a dominant market position in the Czech Republic – the market to which OPAL connects.
The EC stressed that a 3 bcm per year gas release programme at the German-Czech border was a
condition for a dominant supplier in the Czech Republic to fully use the OPAL capacity. As Gazprom did
not agree to implement this gas release programme, the BNetzA in July 2009 then allowed Gazprom to
use only up to 50% of OPAL’s transit capacity. This edict was valid until autumn 2016. In November
2013, the EC was notified of a draft decision by the BNetzA to review the original exemption decision of
25 February 2009 granting near total access, then modified in July 2009. It must be noted that the
amended decision from the BNetzA from July 2009 stressed that should Gazprom wish to use more than
50% of OPAL capacity, it would have to release 3 bcm capacity at the Czech/German border (Brandov) to
the Czech gas market, which Gazprom did not do – so the 50% limitation for Gazprom on OPAL actually
could be surpassed. Indeed, Gazprom had contested the EC’s position and demanded that the BNetzA
return to the initial more favourable regime from February 2009. The EC then subsequently undertook a
complex review of this issue, which made its way to the political agenda of the European Union-Russia
Energy Dialogue. The review decision, previously scheduled for March 2014, was then postponed
several times in 2014 and 2015, leaving the OPAL pipeline half empty also due to insufficient demand.
Gazprom insisted that it is the only one interested in transporting gas through OPAL at full capacity
while other stakeholders, such as in Central and Eastern Europe, considered that some OPAL capacity
could be used at a later stage following developments in gas markets and that with full utilisation,
Gazprom would strengthen control over Central European markets.
This long-standing OPAL utilisation dispute took a major turn in autumn 2016, following the October
2016 decision C(2016)6950 by the EC to partially and conditionally lift, as from December 2016 and until
2033, the de facto limitation on the use of cross-border OPAL pipeline capacity for suppliers with a
dominant market share in Czech Republic. This came following a request by the BNetzA to revise the
regulation on the basis of a settlement agreement signed among BNetzA, OPAL Gastransport GmbH &
Co. KG, PAO Gazprom and OOO Gazprom Export in May 2016. Following the revised exemption decision,
50% of the pipeline’s cross-border transport would be exempted from third-party access rules and the
other 50% would be covered by new rules designed to “safeguard competition”. It appears that the new
regulation would de facto give Gazprom the ability to use up to 80-90% of the pipeline’s cross-border
capacity under specific conditions, such as bidding for this capacity on the Gaspool trading hub in
Germany at base price. This would allow Gazprom to potentially increase its supplies through the
pipeline from 12 bcm to 13 bcm per year to around 20 bcm to 23 bcm per year, an additional 8 bcm to
10 bcm per year. Gazprom has already been able to rapidly increase the loading of Nord Stream and the
NEL pipeline, but especially the OPAL pipeline in December 2016. Nord Stream was loaded at 80% and
transported a record of 43.8 bcm in 2016.
Yet in December 2016, the EC’s decision on OPAL was contested in relevant European and German
courts by PGNiG, the Polish state-controlled oil and gas company, and Poland for alleged jeopardy to
competition and risks to gas supply security in Poland and Central Europe. Subsequently, the Court of
Justice of the European Union has temporarily suspended the EC’s October 2016 decision, and legal
procedures are ongoing as additional information was requested. Naftogaz also filed a case at the Court
of Justice of the European Union in March 2017 to annul the October EC decision. This whole process
has obviously created significant uncertainty, and it remains to be seen what the court will ultimately
rule, how this will impact the EC decision and what the impact will be on Gazprom’s utilisation of the
OPAL pipeline. Russian gas volumes transported through OPAL have been reported to be falling since
February 2017.

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The second crucial case in Russian-European gas relations is the long-standing Directorate-General for
Competition (DG Competition) inquiry into Gazprom, which has been ongoing since 2012 and led to the
issuing of a Statement of Objection in April 2015. Decisively, following year-long negotiations, DG
Competition accepted and published a settlement proposal by Gazprom in March 2017 which, if not
objected to, would end this critical competition case. While Gazprom could have been taken to court
and sentenced to pay up to 10% of its yearly revenues for abuse of monopoly position, a compromise
was obviously reached, with the European Commission stating this would “meet its objectives regarding
each of the competition concerns, namely by ensuring that: restrictions to re-sell gas cross-border will
be removed, cross-border flow of gas in Central and Eastern European gas markets will be facilitated;
gas prices in Central and Eastern Europe will reflect competitive price benchmarks and that Gazprom
cannot make any advantages regarding gas infrastructure.
Sources: EC (2016), Commission Decision of 28.10.2016 on review of the exemption of the Ostseepipeline-Anbindungsleitung from the
requirements on third party access and tariff regulation granted under Directive 2003/55/EC,
www.ec.europa.eu/energy/sites/ener/files/documents/2016_opal_revision_decision_en.pdf; EC (2017), “Antitrust: Commission
invites comments on Gazprom commitments concerning Central and Eastern European gas markets”, www.europa.eu/rapid/press-
release_IP-17-555_en.htm.
In 2016, Gazprom continued taking all the needed steps for the construction of the Nord Stream 2
despite the ongoing discussion over concerns of several EU member states about increasing energy
dependency on Russia versus increasing security of supply due to declining European production.
Taking into account the strong determination of the Russian company to realise the pipeline and the
involvement of five major European energy companies – Engie, Shell, Uniper, Wintershall and OMV –
this project has an increasing likelihood of being realised and will potentially shape flows of Russian
gas to Europe. With a capacity of 55 bcm, the pipeline will transport gas from Russia to Germany
across the Baltic Sea. According to the plan, the pipeline should be operational at the end of 2019.
The total transit capacity through Nord Stream would then be doubled.
Box 3.2 Nord Stream 2 ownership restructuring

Nord Stream 2 is planned to be the second offshore pipeline from Russia to Germany but entrains a
supply system that is not limited to the offshore 1 200 km section: it involves construction of over
3 000 km of pipelines in Russia from the Bovanenkovo field to Vyborg, near St Petersburg – about 65%
of that pipeline system has been already built. In addition, it involves a major section through Germany:
supplying customers beyond Germany will require doubling the OPAL pipeline with a new pipeline
named Eugal, to be developed by Gascade, a Gazprom/BASF joint venture.
Gazprom is now the sole shareholder developing the Nord Stream 2 pipeline project following questions
raised by the Polish anti-monopoly committee (Urzędu Ochrony Konkurencji i Konsumentów [UOKiK]) in
August 2016, which spurred European partners not to become original shareholders but to support the
project in a different way. In April 2017, Engie, OMV, Shell, Uniper and Wintershall signed financing
agreements with the developer of Nord Stream 2 to each cover 10% of the overall Nord Stream 2
investment of 9.5 billion euros. Gazprom remains the sole shareholder of the project and will provide
the remaining 50% of the project cost. Construction of Nord Stream 2 is still pending approvals;
however, long-term capacity bookings on an open season have been conducted for onward supplies via
the Eugal pipeline project, which is to be built along the current OPAL line, adding a capacity of 50 bcm
to that corridor to the German/Czech border.

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Ukraine
Due to the improvements in the regional gas system of Eastern Europe, Ukraine sourced all its
imports in 2016 via reverse flows from the European Union, without directly buying gas from Russia.
Current import capacity from the European Union stands at 22 bcm per year and is expected to
increase further when an additional interconnection with Poland becomes operational by 2020.
Ukraine has ensured safe transit of Russian gas to the European market in recent years despite facing
extremely challenging economic circumstances. Gas transit obligations have been respected while
experiencing strong economic decline and the conflict with Russia.
Despite the progress in the liberalisation process of the energy market, Ukraine still has to take key
steps towards a more liquid gas market by removing administrative barriers to trade and storage and
finalising the unbundling of the state-owned oil and gas company Naftogaz and of regional gas
distribution companies. Ukraine got a step closer with the adoption of a resolution on a new entry-
exit model that should be in line with provisions of the European Union’s Third Energy Package. The
model provides tariffs for a virtual entry and exit point for each distribution area. Also a new
separate gas transmission operator has been established, Main Gas Pipelines of Ukraine.
Figure 3.3 Ukraine’s gas balance, 2002-16

bcm
100
80
Gas imports from EU via reverse
60 flows
Gas imports from Russia
40
Domestic gas production
20
0
2002 2004 2006 2008 2010 2012 2014 2016
Sources: Naftogaz (2017), Natural Gas Consumption in Ukraine; IEA (2017a), Natural Gas Information (database); IEA (2017b, Gas Trade
Flows (database).
The exact governance of the new unbundled company remains to be seen, as does how storage and
transmission assets will be handled. Last year, Naftogaz remarkably managed the winter injection
and outtake so that no technical transit disruption occurred at a time when Russian gas volumes in
transit increased by nearly 20 bcm.
Turkstream: Rapid progress
Turkey is the second-largest importer of Russian gas, bringing in around 27 bcm per year, covering
more than 55% of its domestic demand. For Russia, gas flows to Turkey represent 17% of all its
exports to Europe. The Turkstream pipeline project linking up Russia with Turkey via the Black Sea is
believed to be making rapid progress; following the ratification of relevant intergovernmental
agreements and the signature of a pipeline-laying contract in 2016, the construction start was
reported by Gazprom in May 2017 and is expected to end in late 2019. A first 15.75 bcm line will
replace Russian gas currently supplied via the Ukraine route to Turkey. A second line may be built if
the onward route through the European Union is available to transport gas to European countries.

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Southern Gas Corridor: From Azerbaijan to Europe

The Southern Gas Corridor is the 3 500 km-long gas value chain from the Shah Deniz Stage 2 field in
the Caspian Sea all the way through the South Caucasus Pipeline Expansion (SCPX) in Azerbaijan and
Georgia, the Trans Anatolian Pipeline (TANAP) in Turkey and finally the TAP in Greece and Albania to
Italy, landing in the south of Italy. The project timeline aims at a mid-2018 production ramp-up to
first export an additional 6 bcm to Turkey and later 10 bcm to Europe through the TAP by 2020.
Pipeline construction is ongoing, and successful progress is reported on most fronts. Azerbaijan’s
Shah Deniz Stage 2 field is 90% complete, and the expansion of the SCPX capacity is 93% complete
(BP, 2017). TAP reports that it is 41% complete and on time (TAP, 2017).
The gas arteries to China

China continued to increase gas imports in 2016. Currently, 55% of China’s imports are transported
via pipeline, with Turkmenistan as the main source, delivering around 30 bcm in 2015 and accounting
for around 80% of all pipeline volumes. During recent years, the ratio between pipeline and LNG
imports has been changing substantially. The increase in imports has been mainly driven by LNG
imports, which had the strongest y-o-y growth of all supply sources in China (around 37%). With
around 10 bcm, the country also led the 2016 global ranking of y-o-y growth in LNG imports,
followed by Egypt (7 bcm) and India (6 bcm).
Figure 3.4 China’s supply portfolio sources by country, 2016
Indonesia (LNG) Malaysia (LNG) PNG (LNG)

2% 1% Others (LNG)
2%
Qatar (LNG) 1.2%
Australia (LNG) 3%
7.6%
Myanmar (pipeline)
1.9%
Kazakhstan (pipeline)
0.2%
Uzbekistan (pipeline)
2.1%
Domestic production
65%
Turkmenistan (pipeline)
14%
Sources: LNG share, based on GIIGNL (2017), The LNG Industry GIIGNL Annual Report 2017.
China’s existing pipeline import infrastructure (yearly capacity of 55 bcm from the Caspian region and
5 bcm from Myanmar) is currently underutilised at around 60%; the plan to expand the existing
pipeline import infrastructure by an additional capacity of 30 bcm/year from Turkmenistan (the
fourth line of the Asian-China Gas Pipeline D) has been put on hold. China’s significance as a key
market for Turkmenistan has risen since gas exports to Russia have not resumed and disputes about
payments for gas quantities with Iran are ongoing. As gas exports are the key contributor to the
Turkmenistan state budget, China seems to be in a strong position when it comes to renegotiation of
existing contracts or additional import quantities. However, during the forecast period, total pipeline
imports are expected to increase by around 25 bcm (70% of the incremental pipeline volumes are

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expected to be imported from the Caspian region), whereas LNG imports will go up by about 45 bcm,
thanks to higher competitiveness in the coastal areas, where pipeline gas is facing disadvantages due
to higher transportation costs.
Pipeline imports via the Myanmar-China Gas Pipeline, which runs from the western coast of
Myanmar to China’s Yunnan Province, started in 2013 – however gas imported via this route is more
expensive than other pipeline sources. The current pipeline transportation capacity of around 5 bcm
(Phase I) has the potential to be expanded up to 12 bcm by adding compressors (Phase II) but a
further increase of transportation capacity depends on demand growth in the preferred target areas.
Until 2022, only a slight increase of gas imports from around 3 bcm in 2015 to 5 bcm is expected.
Gas supply contracts with Russia were signed in 2014, but additional Russian quantities via the
eastern route of Power of Siberia are expected at the end of the forecast period: companies
underline that Power of Siberia can be commissioned in 2019, however ramp-up of gas imports via
this pipeline are expected at the mandatory start of supplies at the end of 2020 to reach around
8 bcm at the end of 2022.
US shale production is shaping pipeline exports

In North America, for decades the main cross-border traded volumes have been transported from
Canada to the United States. Canadian exports reached a peak of around 110 bcm in 2007, the year
in which US shale gas production started to rise. Since then, export volumes have declined steadily,
and in recent years imports of US shale gas into eastern Canada, formerly small, have increased
significantly, displacing gas from western Canada. In 2016, Canada exported around 82 bcm to the
United States, whereas it imported 22 bcm. Exports from Canada are expected to decrease further by
around 4 bcm to 78 bcm in 2022.
New pipelines comprising around 21 bcm of capacity are expected to connect US shale gas in
Pennsylvania to eastern Canada by 2018. In response to this competitive threat, TransCanada, whose
Mainline formerly supplied nearly all the gas requirements of the eastern provinces as well as
New England, offered to cut its tolls by around 55% to USD 0.81 per million British thermal units
(USD 0.77 per gigajoule) in an open season, for ten-year capacity commitments. This led to capacity
bookings of 15 bcm per year (1.5 Petajoule per day) (TransCanada, 2017).
Figure 3.5 Appalachian Basin gas production and pipeline exports from Canada to US, 2010-16
bcm/month Utica
25 10 production
20 8
bcm/month
Marcellus
15 6 production
10 4
5 2 Canadian
pipeline gas
exports to
0 0
the US
Jan-2010 Jan-2011 Jan-2012 Jan-2013 Jan-2014 Jan-2015 Jan-2016
Sources: EIA (2017a), U.S. Natural Gas Exports and Re-Exports by Country (database), www.eia.gov/dnav/ng/ng_move_expc_s1_a.htm.
EIA (2017b), Drilling Productivity Report, www.eia.gov/petroleum/drilling/, www.eia.gov/petroleum/drilling/.

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US gas exports to Mexico have tripled since 2010. With the large Mexican development programme
for new pipeline capacity, cross-border and within Mexico, substantial new US volumes will be
transported from the Permian and Eagle Ford shale formations to Mexican industry and households.
At the end of the forecast period approximately 45 bcm is expected to be imported from the
United States by pipeline, satisfying around 50% of the domestic demand of Mexico.
Figure 3.6 Composition of Mexico’s gas imports, 2010-22

bcm
60
Pipeline imports
40
20
LNG imports
0
2010 2012 2014 2016
Map 3.2 Mexico’s natural gas infrastructure, 2016

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Pipeline trade will reshape relations within the United States: the gap between pipeline and LNG
trade, which opened up between 2014 and 2016, is expected to continue. Besides some domestic
growth in the industry sector, US gas quantities are redirected to the Gulf Coast and to the South,
where they cross the border to Mexico to supply the additional quantities needed basically to
support the oil-to-gas switch in power generation.
During the forecast period, the current pipeline capacity of around 100 bcm/y from the United States
into Mexico (including Energy Transfer Partners’ Comanche Trail and Trans-Pecos Pipeline, which
were commissioned during the first quarter of 2017) will be further extended: current projects
include ONEOK Partners’ Roadrunner Phase 2 (4 bcm/y) and Howard Energy Partners’ Nueva Era
pipeline (5 bcm/y), expected to be commissioned in 2017. Spectra’s Nueces-to-Brownsville project in
South Texas (27 bcm/y) and Kinder Morgan’s Mier-Monterrey project (4 bcm/y) are planned to
further increase pipeline capacity in 2018.
North Africa: Algeria repositions itself on the European market

Over the past decade, domestic gas consumption has been structurally increasing and production has
started to level off, leading to a 30% decrease in exports to 45 bcm in 2015. In 2016, however,
Algeria’s state-owned Sonatrach started to reposition itself on the European market. Forced by an
oversupplied LNG market with relatively low international prices, Sonatrach started to look again to
its traditional customers, increasing pipeline export volumes to Italy by 12 bcm to 19 bcm. Exports to
Spain remained unchanged at 16 bcm, and with 16 bcm of LNG exports, the total export volume
reached around 52 bcm. After years of declining pipeline exports to Italy, partly caused by substantial
replacement of Algerian gas with more attractively priced Russian imports, the Italian oil and gas
group Eni signed an agreement with Sonatrach that covers around 20% of Italian gas imports for the
year 2017. In this forecast, Algerian pipeline and LNG exports are expected to decrease only slightly
by 2022.
The Middle East: Expanding pipelines driven by an increasing demand

In the Middle East, Qatar is the major exporter of pipeline gas, exporting approximately 18 bcm via
the Dolphin pipeline system to the United Arab Emirates. With a capacity of 20 bcm per year, the
pipeline can satisfy around 25% of the domestic demand of that country. The pipeline transports gas
from Qatar’s North Field, its largest offshore field, to Abu Dhabi and the northern part of the
United Arab Emirates, to continue its way to Oman. Last year Qatar signed a new agreement to
supply more natural gas to the United Arab Emirates.
In the region, Iran is the second-largest exporter of pipeline gas, transporting 8 bcm to 9 bcm per
year to Turkey. After the lifting of sanctions against Iran in early 2016, many pending bilateral
agreements from the pre-sanction era for the construction of pipelines from Iran to surrounding
countries may see the light again. Within the forecast period, one of the most credible options is a
pipeline to Oman, based on a bilateral agreement signed in 2014 to supply 10 bcm per year of Iranian
gas. In addition, the construction of the Pakistani side of the Iran-Pakistan pipeline (the Iranian part
of the line is already finished) is in sight, making gas deliveries possible with a maximum of 7 bcm per
year to a country that has seen chronic gas shortages during recent years. The TAPI (Turkmenistan-
Afghanistan-Pakistan-India) pipeline project could start feeding Pakistan. Difficulty in financing and
the Afghanistan security situation are hindering progress on this project.

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South America: Gas pipeline deliveries a recurrent bilateral issue

The main regional gas exporter in South America is Bolivia. In 2015, Brazil imported around 11 bcm
and Argentina imported about 6 bcm from Bolivia based on oil-indexed long-term contracts. Pipeline
supply between Bolivia and Brazil is subject to a long-term contract that delivers up to 11 bcm per
year. This contract expires in 2019, yet both parties have already signalled their intention to extend it
until 2022. However, clauses concerning volumes will most likely be revised downward given that
Petrobras is understood to stop sourcing gas for other players in the Brazilian market and will
exclusively uptake volumes to cover its own demand needs. Therefore, large distribution companies
will have to enter into negotiations with the Bolivian supplier Yacimiento Petrolíferos Fiscales
Bolivianos (YPFB), or alternatively YPFB may also directly supply the Brazilian market.
The supply agreement with Argentina will end in 2027. Looking forward, Bolivian gas production will
start declining as some of the main existing fields enter into their natural depletion phase. Such
declining trends will certainly have an impact on the security of supply situation of the region. In
2016, an unexpected increase in gas demand in Bolivia forced the state-owned company YPFB to
deliver less natural gas than required in the contract between the two countries.
LNG trade
In 2016, LNG trade grew by around 25 bcm. It is expected to grow faster than pipeline trade, by an
annual rate of 4.5%, so that by 2022 LNG trade equals 460 bcm. Growth in LNG supply capacity will
be faster than the growth in LNG demand, and the 75% of new supply capacity will come from two
countries, Australia and the United States. China will be the main driver of the global LNG demand
growth, and relatively new importers will also show large increases in LNG demand. OECD countries
have traditionally been the largest source of global LNG demand, but LNG import volumes of these
countries have decreased and this tendency will continue throughout the forecast period (Figure
3.7). By contrast, LNG demand of non-OECD countries has increased rapidly, backed by the growing
gas demand of these countries, and LNG import volumes of non-OECD countries will exceed those of
OECD countries in 2022. The LNG export side shows a different picture. Historically, LNG exports
have come predominantly from non-OECD countries, but the surge of new liquefaction capacity in
Australia and the United States and the stagnation of LNG export capacity in non-OECD countries
have resulted in a more balanced picture.
Figure 3.7 World LNG imports and exports, OECD and non-OECD, 2012-22
LNG import volumes LNG export volumes
bcm bcm
300 300
250 250
200 200
150 150
100 100
50 50
0 0
OECD countries Non-OECD countries

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LNG demand: A new group of thirsty LNG importers

This report forecasts that global LNG demand will reach 460 bcm in 2022, increasing by more than
100 bcm compared with the 2016 level, or more than 30% growth over the forecast period (Figure
3.8, Map 3.3).
From 2016 to 2022, China will show the largest LNG import increase in the global LNG market, and its
LNG demand will increase more than 40 bcm by 2022 from the 2016 level. Non-OECD Asia (excluding
China) is expected to experience a steady growth path through the forecast period, adding around
70 bcm to 2016 LNG demand. India is also seen as an emerging LNG importer, capable of generating
a meaningful demand increase with impressive growth rates of around 11% per year, and its LNG
import volume will be double the 2016 level. Bangladesh, Indonesia and the Philippines are forecast
to join the LNG import club and to start importing LNG before 2020.
Figure 3.8 World LNG imports by region, 2012-22

bcm bcm Change between 2016 and 2022
500 80
450 70
400 60
350 50
300 40
250 30
200 20
150 10
100 0
50 - 10
0 - 20
2012 2014 2016 2018 2020 2022
Africa China Europe Latin America Middle East Non-OECD Asia OECD Americas OECD Asia Oceania
In OECD Asia Oceania, Japan and Korea together continue to make up the largest LNG-importing
region, but its imports will decline by 12% between 2016 and 2022, in contrast with the strong
growth observed over the last decade. In Japan, assuming a modest recommencement of nuclear
power, demand may be below contracted volumes from 2017. In Korea, the government changed in
Q2 2017. The target of the government is to reduce nuclear and coal power generation output,
creating new possibilities for gas.
Stagnating demand and decreasing production will increase Europe’s import needs over the forecast
period. Europe’s LNG demand has been and will be lower than the contracted LNG volumes, mainly
because of weak gas demand after the euro crisis and competition from pipeline gas. The expiration
of LNG contracts in the coming years will allow Europe to rebalance the long positions.
Latin America will see some LNG demand increase with the addition of Colombia, Haiti, Panama and
Uruguay. LNG demand in Canada, the United States and Mexico, in OECD Americas, loses ground due
to the strong competition with pipeline gas in the region.
Though Ghana and Namibia are assumed to start importing LNG in the coming years, overall African
LNG demand in 2022 will be around 2 bcm, one fifth of the 2016 level, mainly because Egypt is
expected to benefit from domestic production of its new gas fields and ease its existing importing
needs substantially.

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Map 3.3 LNG import countries and LNG import volumes, 2010-22
New small players

One of the most interesting aspects in the recent LNG trade is the growing role of the new but small
players. The group of small importers, mostly with a short history in the LNG market or at least not
importing large volumes traditionally, has grown significantly over the last few years (Figure 3.9).
Three of those importing countries, Egypt, Jordan and Pakistan, started importing LNG from 2015
and imported more than 18 bcm in 2016, as much LNG as imports by the United Kingdom and France
combined. Other relatively new small players such as the United Arab Emirates, Kuwait, Thailand and
Singapore grew significantly, importing in 2016 more than two times the volumes imported in 2013.
Figure 3.9 Growth from small and new LNG importers, 2012-22
bcm
100 Other Middle East
90 Other Africa
80 Other Asia
70 Latin America
60 Europe
50 United Arab Emirates
40 Kuwait
30 Egypt
20 Pakistan
10
Thailand
0
Singapore
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Egypt has become one of the most interesting LNG players in the oversupplied global LNG market.
With the finding of a new large gas field, Egypt cancelled its third FSRU, which it had planned to

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introduce in 2017. This report forecasts that Egypt’s LNG imports will probably decrease to zero in
the coming years. Pakistan will increase its LNG import significantly to around 20 bcm in 2022 and
become the sixth largest LNG import country just behind Chinese Taipei.
In addition, from 2014, other countries such as Colombia, Finland, Jamaica, Lithuania, Malta and
Poland have joined the club of LNG importers, and Bahrain, Bangladesh, Ghana, Haiti, Indonesia,
Namibia, Panama, the Philippines and Uruguay are expected to start importing LNG during the
forecast period. However, actual demand will depend on LNG prices and competitiveness against
alternative fuels in their respective domestic markets. This surge of new and small importers will
bring new pockets of demand. LNG imports of these new and small players will be more than double
the 2016 level and account for around 20% of global LNG trades, close to those of Japan or China.
Japan and Korea
Historically, Japan and Korea have been the largest LNG importers. Japan reached a turning point in
2016, when its LNG demand started to lag behind its contracted LNG volumes (Figure 3.10). The gap
between contracted volumes and imported volumes was reduced to reach a balance point in 2016,
and from 2017 onwards, the addition of new contracts and decreasing demand will result in a
significant over-contracted position for the first time. The gap will see the surplus peak in 2018,
reaching around 25 bcm, and then gradually shrink to around 5 bcm in 2022. One of the tools to
manage this potential oversupply is destination flexibility of LNG, and from 2018 to 2022, Japan could
utilise around 15 bcm of contracted volumes with flexible destinations by diverting their agreed
volumes to other LNG-importing countries where LNG is needed. In fact, Japanese LNG importers
have already started such adjustments with European LNG importers. In June 2017, the Japan Fair
Trade Commission released its review aiming at ensuring fair competition in LNG trades, and stated
that competition-restraining clauses or business practices should be eliminated from new or revised
LNG contracts, and LNG sellers should review such clauses or business practices in existing contracts.
Figure 3.10 Demand and contracted volumes relationship in Japan and Korea, 2010-22
bcm Japan bcm Korea
160 60
140 50
120
40
100
80 30
60
20
40
20 10
0 0
2010 2012 2014 2016 2018 2020 2022 2010 2012 2014 2016 2018 2020 2022
Contracted LNG volumes LNG imports
Korea would face the same situation with different timing, but the over-contracted volumes would
be smaller than Japan. Korea´s contracted level reached and surpassed its LNG demand back in 2015
with around 9.5 bcm of surplus. It will peak in 2017 with 10 bcm per year of surplus and will decrease
to around 8 bcm in 2022. Korea has around 4 bcm per year of destination-free LNG until 2019 and
around 7 bcm from 2020 onwards. However, the Korean government changed in Q2 2017. The new
government targets a nuclear phase-out and curtailment of coal-fired power generation, which

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would lead to an increase in gas use. In that case, LNG imports in Korea would increase and over
contracted position could be mitigated. Developments in these two countries highlight the
importance of greater flexibility in the LNG supply chain, while still ensuring security of supply.
China
China’s LNG imports are still well below their contractual level; however, the country continues
ramping up: between 2015 and 2016, China’s LNG imports increased from around 27 bcm to 36 bcm,
a y-o-y growth of 35%, and January to May 2017 saw a further increase of around 30% compared
with the same period in 2016.
Figure 3.11 LNG import sources and volumes in China, 2006-22

bcm
120 Russia
Qatar
100
Portfolio
80 Papua New Guinea
Malaysia
60
Indonesia
40 Canada
20 Australia
Regasification capacity
0
LNG import volumes
2006 2008 2010 2012 2014 2016 2018 2020 2022
Source: LNG import volumes in 2016: GIIGNL (2017), The LNG Industry GIIGNL Annual Report 2017.
At the end of the forecast period, China will have contracted around 66 bcm, and LNG imports are
well placed to meet potentially burgeoning demand in cities. Additionally, the country is preparing
for options to import even beyond that level. In March 2017, China National Offshore Oil Corporation
(CNOOC), Japan’s JERA and Korean Gas Corporation (KOGAS) signed a memorandum of
understanding, discussing opportunities for mutual collaboration in the LNG business including joint
procurement of LNG. China’s LNG regasification infrastructure is prepared for this event, as projects
under construction are expected to see further expansion in 2017, increasing by 6 bcm to reaching
around 88 bcm.
During the forecast period, LNG imports are expected to be the supply source of choice. Coastal
areas will be an important driver for gas demand growth as the pressure to improve air quality is very
high in the cities along the coast. The proximity of coastal demand areas to the existing regasification
infrastructure makes LNG the preferred option, with lower transportation costs than pipeline imports
and a well-supplied market that puts large importers in a good position to contract additional
quantities at competitive prices.

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Figure 3.12 China’s supply portfolio, 2016 and 2022
China total supply 2016: 210 bcm China total supply 2022: 340 bcm
LNG
LNG imports imports
17% 22%
Pipeline imports
18%
Domestic Domestic
production Pipeline production
65% imports 59%
19%
Europe
Despite the fact that Finland, Lithuania, Malta, Poland and Sweden recently joined the club of LNG
importers in Europe, there is a remarkable decline in contracted volumes across the horizon of this
forecast due to expiring contracts (Figure 3.13). Assuming that the majority of them will not be
renewed, the contracted volumes where Europe is the intended destination in 2022 will be 20%
lower than the contracted quantity in 2015, decreasing from 94 bcm to 76 bcm.
Figure 3.13 LNG contracted volumes in Europe, 2015-22

bcm
100 Others
United Kingdom
80 Turkey
Spain
60 Portugal
Poland
40
Netherlands
20 Italy
France
0 Belgium
2015 2016 2017 2018 2019 2020 2021 2022
The decline of LNG contracted volumes will mainly come from the three largest LNG-importing
countries in Europe – France, Spain and the United Kingdom. Contracted quantities of LNG intended
for Spain will be largest, followed by France and the United Kingdom to a lesser extent. The over-
contracted position of Spain and France will shrink but will still remain and that of the United
Kingdom will stand close to balance over the forecast period. Therefore, the flexibility provided by
Europe in the past in the form of LNG diversions and reloading will be sharply reduced.
By 2022, Spain is expected to have about 10 bcm less of contracted volumes than in 2015. It is worth
mentioning that some Spanish players have entered long-term agreements with US exporters, but
contracted volumes will not necessarily go to Spain or to other countries in Europe if there are other
lucrative markets, as already witnessed in 2016.

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LNG supply: The second wave of LNG is underway

LNG export capacity development
By the end of 2016, global LNG export capacity reached 451.8 bcm, increasing 7.4% relative to the
previous year (Figure 3.14).
This report expects 97% of the additional capacity to come from already-sanctioned projects. This
outlook assumes four additional projects – Sabine Pass Train 6 and Corpus Christi Train 3 in United
States, Fortuna FLNG project in Equatorial Guinea, and Sakhalin II Train 3 in Russia – might take FID in
time for a production start-up within the forecast horizon of this report. Three of these projects will
be expansions to existing facilities with relatively low costs, and one will be FLNG, and therefore
these four projects should come on line with short construction times.
A major boost to export capacity is expected from 2017 to 2019 with average capacity additions of
around 50 bcm each year with the start-up of large projects in Australia and the United States, but
capacity increase will slow from 2020 onwards. By the end of the forecast period, Australia will have
the largest LNG export nameplate capacity, 117.8 bcm per year, and the United States will become
the second-largest with 106.7 bcm per year, slightly above Qatar with 104.9 bcm per year. These
three big LNG export countries will make up half of the global total LNG export capacity of 650 bcm
per year by the end of 2022, and the picture of future LNG trade in the world will be affected by
these big LNG export countries located in Oceania, North America and the Middle East.
Figure 3.14 LNG export capacity, 2016-22

bcm bcm
700 100
90
600
80
500 70
400 60
50
300 40
200 30
20
100
10
0 0
2012 2014 2016 2018 2020 2022
Australia Qatar Russia United States Africa Asia Latin America Others
LNG export nameplate capacity of 650 bcm by 2022 is much higher than the 460 bcm of forecast
demand (Figure 3.15, Map 3.4). While some LNG export plants will be unavailable due to feed-gas
issues and security problems, available export capacity will be more than the expected demand, and
the highest surplus is expected by 2020 and then will shrink towards the end of forecast period.
Across the LNG export side, it is worth highlighting the role of the new liquefaction projects, in
particular those in the United States, giving destination flexibility. The expiring contracts in many
existing liquefaction projects will reduce utilisation, especially in those with higher exposure to spot
sales. The role of portfolio players is crucial to unlock new demand, and their market power with
their aggregated volumes should not be underestimated.

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Figure 3.15 World LNG exports by region, 2012-22

bcm bcm Change between 2016 and 2022
500 90
450 80
400 70
60
350 50
300 40
250 30
200 20
150 10
0
100
- 10
50 - 20
0 - 30
2012 2014 2016 2018 2020 2022
Africa Latin America Middle East Non-OECD Asia OECD Europe FSU OECD Americas OECD Asia Oceania
Russia, Algeria, the United Arab Emirates and Qatar were classified as flexible supply sources in
Global Gas Security Review 2016 (IEA, 2016). Throughout the forecast period, all of these exporters
should increase spare capacity, uncommitted to term contracts. Hence they should be a reliable
source of production flexibility in case demand or supply shocks occur.
The Latin America, Middle East and OECD Europe regions will experience a slight decrease in LNG
exports by the end of the forecast period, falling by around 6% from 2016. In Latin America, Peruvian
exports remain flat around 5 bcm, but overall LNG exports from this region will decrease because of
the drop of LNG export volumes in Trinidad and Tobago due to the lack of feed gas. Exports from
Norway will decrease slightly by 2022.
Map 3.4 LNG export countries and LNG export volumes, 2010-22

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In the case of Africa, LNG exports from Nigeria and Equatorial Guinea will remain relatively flat, and
LNG exports from Angola and Cameroon will be concentrated in the second half of the forecast
period. LNG export from Algeria will decrease due to the expiration of long-term contracts. This
happens precisely when the market faces the largest glut, and it may struggle to sell uncontracted
LNG in the market.
OECD Americas will see a huge increase of LNG exports, with an additional 77 bcm by 2022, coming
mainly from United States as a result of the shale gas boom. OECD Asia Oceania exports will grow
remarkably by around 30 bcm and reach 90 bcm in 2022, coming from the new projects in Australia.
Another 20 bcm of exports will be sourced from Russia on top of around 15 bcm in 2016.
The highest decrease in LNG exports is coming from the non-OECD Asia region, where there will be a
drop of around 10 bcm in 2022 from around 75 bcm in 2016. Expiring contracts in Malaysia that have
Japan as the destination might not be renewed fully, taking into account the over-contracted
position of Japan, and Malaysia might have to find new destinations. Long-standing feed-gas issues in
Indonesia account for the majority of the remaining decrease in the region.
United States
The United States, which has 14 bcm of capacity at the time of writing, is expected to rise to 107 bcm
by 2022. New facilities will open at Cameron, Corpus Christi, Dominion Cove Point, Elba Island and
Freeport and new trains are being added at Sabine Pass. The United States began exports in 2016,
exporting nearly 5 bcm mostly to Mexico, South America and Asia (Box 3.3). These exports are
expected to soar to 82 bcm by 2022.
Box 3.3 Destination of US exports in 2016

There were big expectations with the new US exports, as they were built with a different business model
and offer off-takers flexibility in terms of destination. Sabine Pass Trains 1 and 2 started LNG exports in
2016 and exported 4.7 bcm over the year (Figure 3.16). LNG cargoes headed to Europe in 2016
accounted for only 10% because European gas prices were too low for US LNG to penetrate into the
European gas market. On the contrary, Mexico and South America became the preferred destination,
receiving almost half of the LNG cargoes, followed by Asia, which received 30% of the US LNG. The first
shipments of US gas to Japan arrived just after New Year in 2017.
Figure 3.16 Destination of US LNG exports by country, 2016
bcm US LNG destination and volumes Share of US LNG destination by region
0.8
0.7 Europe
0.6
10%
0.5 Mexico
0.4 MENA
and
0.3 14%
South
0.2
America
0.1
0.0 46%
Asia
30%
Note: MENA = Middle East and North Africa.

Source: ICIS (2017), ICIS LNG Edge.

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Chile was the most frequent destination of US LNG in 2016, a maritime route that is much more
attractive thanks to the Panama Canal. However, the South America region will potentially move away
from LNG imports significantly because of the promising prospects for domestic production in both
Brazil and Argentina, and this could affect the destination of the US LNG in the future.
Australia
Australia is already the second largest exporter of LNG, with 89 bcm of capacity of which 32 bcm was
added in 2016. The third train of the Gorgon facility started operations in March 2017, making
Gorgon at 21.2 bcm, one of the largest facilities in the world. New facilities at Ichthys, Prelude and
Wheatstone will increase capacity to 118 bcm by 2018 to move Australia ahead of Qatar. LNG
exports, 61 bcm in 2016, are set to grow to 90 bcm by 2022.
Russia
Russia is expanding its exporting capacity from up to around 40 bcm by the end of the forecast
period, starting the Yamal project on top of the existing Sakhalin II liquefaction facility, which holds
15 bcm of LNG export capacity, and will become the world´s sixth-largest LNG exporter just behind
Indonesia and Malaysia. Flexibility will be another advantage of Russia’s LNG in terms of both volume
and destination. Existing contractual commitments with off-takers will leave room for 8 bcm of LNG
exports, which would be offered on spot or short-term basis, or even being secured under long-term
contracts. Moreover, the majority of output from the Yamal project is taken up by portfolio players
such as Total and will enjoy destination flexibility.
Algeria
Algeria currently holds 38 bcm of LNG export capacity, but some upstream production issues
constrain its export capacity. As a result, long-term contracted volumes are limited to 20 bcm and
10 bcm of the contracted volumes will expire by the end of 2019. Although the extension or renewal
of some of these contracts is possible, given the limited availability of upstream production and the
expected oversupply situation in the global LNG market, Algeria might prioritise pipeline exports
instead of pursuing the contracts’ renewal.
In its LNG export strategy, Algeria is focusing on the Mediterranean region. Amid a relatively weak
LNG demand in Asia and Europe, Sonatrach has been increasing exports to Mediterranean countries
such as Turkey, Egypt and Jordan during the recent years. At the end of last year, Sonatrach signed a
co-operation agreement with the state-owned company of Turkey, Botas, aiming to strengthen its
position in the regional markets, illustrating the increasing importance of the Turkish market. In
2000, 12% of all exported Algerian LNG volumes went to Turkey, and currently, around 25% of
Algeria’s LNG reaches the regasification facilities at the Turkish coast, delivering around 4 bcm per
year based on a long-term contract that will expire in 2020. Turkey’s LNG imports might decline due
to pipeline imports via Turkish Stream in the future.
Nigeria
Despite internal shortages, in 2016, Nigeria continued to export substantial LNG volumes because of
the obligations agreed in long-term contracts. Looking at the long-term obligations of the country,
and combined with the fact that selling gas at higher prices via the global LNG market is more

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attractive for the gas producers than selling to domestic power producers, LNG exports will remain at
high levels, around 25 bcm per year, during the years to come.
United Arab Emirates
The United Arab Emirates exports 80% of its LNG volumes, 8 bcm per year, under a long-term
agreement with Japanese importer JERA, formerly TEPCO, and 20% on a spot basis. The existing
6.4 bcm per year long-term contract with JERA will expire by the end of 2019. Given the expected
over-contracted situation of Japan, renewal or extension of the contract might come into question. In
a context of oversupply, it will face big LNG sales competition, but once existing LNG export facilities
are fully amortised, it could presumably offer competitive LNG sales options among the LNG
exporters, assuming feed-gas supplies are available.
Qatar
Qatar is the world’s largest LNG exporter with a liquefaction nameplate capacity of 105 bcm. In 2016,
Qatar LNG exports were almost 105 bcm, which represented roughly a third of global LNG trade and
nearly 100% utilisation rate of its nominal capacity, and are estimated to be around 100 bcm over the
forecasted period. Ninety six percent of its capacity is committed under term contract and almost 30% of
these volumes have flexible destination clauses. This has allowed Qatar to become a reliable supply
source of flexible LNG to the spot market beyond its term commitments. In addition, the expiration of
several contracts in the coming years, mainly destined to Japan and the United Kingdom, will probably
result in increased volume flexibility. With the existing contractual commitments, Qatar will have around
15 bcm of uncontracted volumes by 2022. To maintain its position as the major LNG exporter, which has
already been announced by its government, the country has reoriented its strategy towards new LNG
importers. Figure 3.17 shows a major shift in Qatar LNG exports over the period 2012-2016 from
traditional LNG buyers like Japan or United Kingdom towards new LNG import countries like Egypt,
Thailand and Pakistan. This change has allowed Qatar to maintain its LNG export volumes over the period
while LNG exports to traditional buyers decreased.
Figure 3.17 Change of LNG export volumes from Qatar by countries, 2012-16
bcm Change between 2012 and 2016
8
6
4
2
0
-2
-4
-6
Japan Korea India United Kingdom Chinese Taipei China Egypt Italy Thailand Pakistan
Source: ICIS (2017), ICIS LNG Edge.
Portfolio players
LNG volumes marketed by portfolio players currently are, and are expected to continue being, the
largest supply source in the LNG market. Portfolio players have larger LNG term contracts with

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import players than Australia, which will have the largest export capacity in the world from 2019
during the forecast period. With the existing contracts in place today, from 2019 to 2022, around
120 bcm on average are contracted between portfolio players and import players annually. Shell will
be the largest portfolio seller at the time of writing, accounting for around 40% of the sales, followed
by a second set of portfolio players made up of Total, BP and Gazprom, together presenting around
25% of total portfolio sales. A third set of portfolio players comprising Engie, Gas Natural Fenosa,
KOGAS, Petronas, JERA, Mitsui, Osaka Gas, Mitsubishi and Sumitomo are responsible for about 20%
of the portfolio sales.
LNG investments: The lack of new investments in LNG export infrastructure

LNG export infrastructure
Due to the second wave of liquefaction projects coming online, capacity will grow from 451.8 bcm in
2016 to 650 bcm in 2022. Well-supplied markets will keep downward pressure on prices and
discourage new investments in LNG liquefaction facilities. In 2016 only two new final investment
decisions (FIDs) were taken to expand existing or build new LNG facilities and, at the time of writing,
only one FID has been taken in 2017.
LNG export projects with FID taken in 2016

Many planned projects were pushed back amid falling prices and deteriorating market conditions. In
2016, only two projects, with total nameplate capacity of 8.6 bcm per year, got the green light for
constructing new LNG export facilities (Table 3.1). Yearly sanctioned new liquefaction capacity
decreased from around 35 bcm annually for a four-year period between 2011 and 2014, to around
25 bcm for four projects in 2015, and to less than 10 bcm for two projects in 2016. One of them is an
additional train of existing liquefaction facilities in Indonesia, with FID taken in July 2016. In Q4 2016,
without official statement on FID, one project began construction in North America. The newly
sanctioned LNG export project in North America in 2016 is Elba Island LNG, at the site of the existing
Elba Island LNG import terminal in the US state of Georgia. Elba Island LNG is a two-phase project
with ten small modular liquefaction facilities: six trains for the first phase by 2018 and four trains for
the second phase by 2019. In June 2017, in Mozambique, the first FID in 2017 was taken by Eni for
Coral FLNG which will hold around 4.5 bcm of annual liquefaction capacity and is expected to come
online in 2022.
Table 3.1 LNG projects that took FID in 2016

Country Project Capacity (bcm/y) Major participants
Indonesia Tangguh LNG (T3) 5.2 BP
United States Elba Island LNG (T1-T10) 3.4 Kinder Morgan
Total 8.6
LNG export projects that started in 2016

In 2016, three new LNG projects, two trains each, and one train of two existing LNG projects, started
LNG production. Nameplate capacity of 48.8 bcm per year, equal to around 10% of existing export
capacity of the world in 2016, was added to the global LNG export capacity. Three-fourths of the new
addition is located in the Asia Oceania region, mainly in Australia, and 25% is in the United States.

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These additions are the beginning of the massive addition of LNG export capacity in the coming
years, led by Australia and the United States (Table 3.2).
In 2016, Australia became the world’s second-largest LNG export country, behind only Qatar, in
terms of LNG export nameplate capacity. On Australia’s eastern coast, there are three LNG export
projects, Queensland Curtis LNG, Gladstone LNG (GLNG) and Australia Pacific LNG (APLNG). These
projects generally source gas from coalbed methane (CBM) reserves in Queensland (mostly in the
Surat Basin), Australia.
Table 3.2 LNG projects that started operation in 2016

Capacity
Country Project Major participants First cargo
(bcm/y)
Australia APLNG (T1) 6.1 Origin Energy, ConocoPhillips, Sinopec January
Australia APLNG (T2) 6.1 Origin Energy, ConocoPhillips, Sinopec October
Australia GLNG (T2) 5.3 Santos, Petronas, Total, KOGAS May
Australia Gorgon LNG (T1) 7.1 Chevron, ExxonMobil, Shell March
Australia Gorgon LNG (T2) 7.1 Chevron, ExxonMobil, Shell October
Malaysia MLNG (T9) 4.9 Petronas September
United States Sabine Pass (T1) 6.1 Cheniere February
United States Sabine Pass (T2) 6.1 Cheniere August
Total 48.8
Notes: MLNG = Malaysia LNG; bcm/y = bcm per year.
GLNG, the second CBM-fed LNG project, started LNG production from the second train in May 2016;
the first train started export in October 2015. The USD 18.5 billion project is operated by the
medium-size Australian independent company Santos. GLNG signed Malaysia’s Petronas and Korea’s
KOGAS base to 20-year long-term contracts starting from 2016, with the contracted volumes of
4.8 bcm annually each, which is equal to almost 90% of its export capacity.
APLNG, the third and last CBM-fed LNG project, shipped its first cargo to China in January 2016. The
project’s total nameplate capacity is 12.2 bcm per year. Almost 95% of its export capacity is booked
under 20-year long-term contracts starting from 2016. China’s Sinopec contracted roughly 85% and
Japan’s Kansai Electric around 10%.
Gorgon LNG, with capacity of 21.2 bcm per year (Trains 1-3), is one of the world’s largest natural
gas projects and the largest single resource development in Australia. After roughly six years for
construction at a cost exceeding USD 50 billion, the first and second trains started operation in
2016. Gorgon is known for introducing one of the world’s largest carbon capture and storage
projects, with facilities to inject and store 3 million tonnes (Mt) to 4 Mt per year of carbon
dioxide into a deep reservoir unit more than 2 km beneath Barrow Island, where the LNG plant is
located. It has 75% of its 21.2 bcm per year export capacity booked under long-term contracts
destined to Japan, Korea, China and India. The rest of the export capacity is handled by the
portfolio players Chevron, Shell, BP and ExxonMobil.
MLNG started LNG production from its ninth train in September 2016. Combined with the other eight
trains, total LNG export nameplate capacity of MLNG, owned by Petronas, reached almost 40 bcm
per year, the second-largest LNG project in the world at the end of 2016. LNG from the ninth train is
distributed as the Petronas portfolio volumes.

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Sabine Pass LNG, the liquefaction complex adjacent to existing regasification facilities in the United
States, exported its first cargo in February 2016. Cheniere Energy, the operator, plans to have six
trains, each with annual capacity of 6.1 bcm, and has already taken the final investment decision
(FID) for five trains. In 2016, the first and second train came on line as the very first in a wave of new
LNG export facilities in the United States. Shell and Gas Natural Fenosa booked around 85% of the
export capacity of Trains 1 and 2 under 20-year long-term contracts as their portfolio sources.
LNG export projects expected to start in 2017

In 2017, 43.9 bcm per year of nameplate capacity, almost the same amount as the capacity added
globally in 2016, is planned to come on line. Almost 75% of the new addition is in Australia and
United States, and Russia also plans to start the first train of Yamal LNG, its second project after the
Sakhalin II project. The first floating LNG (FLNG) projects in the world will start commercial operation
in 2017 (Table 3.3).
Petronas FLNG SATU in Malaysia shipped its first cargo in April 2017. Petronas is also constructing its
second FLNG, under construction at a shipyard in Korea, expected to come on line around the end of
this decade. Another FLNG is under construction in Cameroon, after FID was taken in 2015, located
roughly 20 km from the coast of Cameroon. This first FLNG project in Africa is expected to commence
LNG production in late 2017.
In Australia, the third train of Gorgon LNG started operation in March 2017, one year after the start-
up of its first train. Wheatstone LNG, with an expected start-up in mid-2017, will be the fifth LNG
project of the seven Australian LNG projects that started construction after 2009. With these new
additional liquefaction capacities, Australia will close the gap with Qatar, holding the world’s largest
LNG export capacity.
Table 3.3 LNG projects expected to start operation in 2017

Capacity
Country Project Major participants FID
(bcm/y)
Australia Gorgon LNG (T3) 7.1 Chevron, Shell, ExxonMobil 2009
Australia Wheatstone LNG (T1) 6.1 Chevron, KUFPEC, Woodside 2011
Cameroon Cameroon FLNG 1.6 SNH*, Perenco, Golar 2015
Indonesia Sengkang LNG 0.7 Energy World Corporation 2011
Malaysia Petronas FLNG SATU 1.6 Petronas 2012
Russia Yamal LNG (T1) 7.5 Novatek, Total 2013
United States Dominion Cove Point LNG 7.1 Dominion 2014
United States Sabine Pass (T3-T4) 12.2 Cheniere Energy 2013
Total 43.9
Note: SNH = Société Nationale des Hydrocarbures.
Yamal LNG, the second LNG project in Russia, is expected to start LNG production from its first train
in Q4 2017. Yamal LNG is expected to produce 22.5 bcm per year of LNG in total with its three trains
by the end of this decade. Yamal LNG is located above the Arctic Circle. Due to the low average
annual temperatures, Yamal LNG is unique in its liquefaction process – requiring less energy input for
liquefaction – and its LNG deliveries, to northeast Asia through the Northern Sea Route in summer

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and to the European region through westward routes in winter. Special LNG carriers are being built
for the Yamal LNG project to enable year-round supplies of LNG to the Asian and European markets.
In the United States, the third train of Sabine Pass LNG has completed commissioning and was turned
over to Cheniere Energy in March 2017. The fourth train of Sabine Pass LNG is commissioning and
will come on line in mid-2017. Dominion Cove Point LNG is expected to start exports in late 2017 and
will be the first LNG export facility on the East Coast of the United States and the second in the
continental United States behind Sabine Pass LNG. In total, in the United States, 19.3 bcm per year of
export capacity will be added in 2017.
LNG export projects under construction

Today, 139.4 bcm of capacity is under construction globally (Table 3.4). Roughly 75% of the
additional capacity is in the United States and Australia. Six projects expected to start in 2017,
holding 35 bcm export capacity, are discussed in the previous section (“LNG export projects expected
to start in 2017”).
Table 3.4 LNG projects under construction (as of June 2017)

Capacity First
Country Project Major participants FID
(bcm/y) cargo
Australia Wheatstone LNG (T1) 6.1 Chevron, Woodside, KUFPEC 2011 2017
Cameroon Cameroon FLNG 1.6 SNH, Perenco, Golar 2015 2017
Indonesia Sengkang LNG 0.7 Energy World Corporation 2011 2017
Russia Yamal LNG (T1) 7.5 Novatek, Total 2013 2017
United States Dominion Cove Point LNG 7.1 Dominion 2014 2017
United States Sabine Pass (T3-T4) 12.2 Cheniere Energy 2013 2017
Australia Ichthys LNG (T1-T2) 12.1 Inpex, Total 2012 2018
Australia Prelude FLNG 4.9 Shell, Inpex, Kogas, CPC 2011 2018
Australia Wheatstone LNG (T2) 6.1 Chevron, KUFPEC, Woodside 2011 2018
United States Cameron LNG (T1-T2) 12.2 Sempra Energy 2014 2018
United States Elba Island LNG (T1-T6) 2.0 Kinder Morgan 2016 2018
United States Freeport LNG (T1) 6.3 Freeport, Macquarie 2014 2018
United States Cameron LNG (T3) 6.1 Sempra Energy 2014 2019
United States Corpus Christi LNG (T1-T2) 12.2 Cheniere Energy 2015 2019
United States Elba Island LNG (T7-T10) 1.4 Kinder Morgan 2016 2019
United States Freeport LNG (T2-T3) 12.6 Freeport, Macquarie 2014 2019
United States Sabine Pass (T5) 6.1 Cheniere Energy 2015 2019
Indonesia Tangguh LNG (T3) 5.2 BP 2016 2020
Malaysia Petronas FLNG 2 2.0 Petronas 2014 2020
Total 139.4
Note: KUFPEC = Kuwait Foreign Petroleum Exploration Company.
Source: IEA compilation based on information from companies’ websites and own estimates.
There are six LNG projects under construction in the United States, with liquefaction nameplate
capacity of 78.4 bcm per year, expected to start operations by 2019. Cheniere Energy is developing
Sabine Pass and Corpus Christi LNG projects on the US Gulf Coast. On completion, the company will
operate seven trains with total export capacity of 42.7 bcm per year by the end of this decade. Five

T RADE
of the US projects, except for Corpus Christi LNG, are brownfields; that is, they are based on existing
LNG import facilities including shipping facilities and storage tanks. This enables a substantial
reduction of time and cost, compared with greenfield projects, such as those in Australia.
The last wave of 29.1 bcm per year liquefaction capacity addition is expected to come from Australia
by 2018, with the LNG production from Ichthys LNG, Prelude LNG and a second train of Wheatstone
LNG. Nameplate capacity of Australia’s LNG export terminals will reach 117.8 bcm per year, the
largest LNG export capacity globally, by 2019.
LNG import infrastructure
Regasification facilities that started in 2016

In 2016, new regasification capacity additions were 34.2 bcm, lower than the large addition of
47.9 bcm in 2015 (Table 3.5). Six new LNG import terminals and five expansions to the existing LNG
receiving terminals came on line in nine countries. Three countries – Colombia, Finland and Jamaica –
became importers for the first time. More than half of additional regasification capacity is in Asia, led
by China with 12.2 bcm per year.
Among the 11 projects, 5 were designed with floating technologies, highlighting the increased
popularity of this technology, particularly in developing countries, where lower upfront capital costs
and shorter deployment times tend to be particularly attractive.
Table 3.5 LNG regasification terminals started up in 2016

Capacity
Country Project Major participants
(bcm/y)
Argentina GNL Escobar FSRU Expansion 1.0 ENARSA, YPF, Excelerate Energy
China Dalian LNG Expansion 4.1 CNPC (Kunlun Energy)
China Guangxi LNG 4.0 Sinopec
China Jiangsu Rudong LNG Expansion 4.1 CNPC (Kunlun Energy)
Colombia Cartagena FSRU 5.1 Hoegh LNG, Sociedad Portuaria El Cayao
Finland Pori LNG 0.1 Skangas
India Dahej LNG Expansion 6.8 Petronet LNG
Indonesia Bali FRU+FSU* 0.5 Pertamina
Jamaica New Fortress LNG FSU* 0.3 New Fortress Energy
Turkey EgeGaz Aliağa Expansion 2.9 EgeGaz
UAE Abu Dhabi FSRU 5.2 Abu Dhabi Gas Industries, Excelerate Energy
Total 34.2
Note: UAE = United Arab Emirates; FRU = floating regasification unit; * FSU = floating storage unit; ENARSA = Energía Argentina SA; YPF =
Yacimientos Petrolíferos Fiscales; CNPC = China National Petroleum Corporation.
Small-scale LNG regasification terminals in Pori, Finland, started to import LNG for the first time in
2016. This project supplies LNG for shipping, industrial and heavy-duty land transport needs. LNG
usage in maritime transport for bunkering is expected to be a growing market due to emissions
regulation requirements in that region.
Regasification facilities under construction

As of June 2017, 117.7 bcm of new regasification capacity is under construction globally (Table 3.6).

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Table 3.6 LNG regasification terminals under development (as of June 2017)
Capacity
Country Project Major participants Start up
(bcm/y)
China Hainan LNG Expansion 1.3 CNOOC 2017
China Tianjin North 4.1 Sinopec 2017
Greece Revithoussa Expansion 2.0 DESFA SA 2017
Haiti Maurice Bonnefil LNG 0.4 Haytrac Power and Gas 2017
India Mundra LNG 6.8 GSPC LNG 2017
Pakistan Pakistan FSRU 2 7.9 Pakistan GasPort 2017
Philippines Philippines LNG 4.1 Energy World Corp. 2017
Sweden Gothenburg LNG 0.7 Swedegas 2017
Thailand Map Ta Phut Expansion 6.8 PTT LNG 2017
Bangladesh Bangladesh FSRU 5.2 Petrobangla, Excelerate Energy 2018
China Fujian LNG Expansion 1.5 CNOOC 2018
China Guanghui LNG 0.8 Guanghui Energy, Shell 2018
China Zhoushan ENN LNG 4.1 ENN 2018
Finland Manga LNG 0.5 Manga Terminal Oy 2018
Ghana Tema FSRU 4.5 Quantum Power Ghana Gas, Hoegh 2018
India Jaigarh FSRU 5.4 H-Energy 2018
India Kakinada FRU+FSU* 4.7 Gail 2018
Japan Soma LNG 2.0 JAPEX 2018
Japan Toyama Shin-Minato 0.5 Hokuriku Electric 2018
Malaysia Pengerang LNG 4.8 Pengerang LNG 2018
Namibia Namibia FSRU 6.3 Xaris, Excelerate Energy 2018
Panama Costa Norte LNG 0.5 Gas Natural Atlantico 2018
Singapore Jurong Expansion 7.2 SLNG 2018
Chinese Taipei Taichung Expansion 0.7 CPC 2018
Uruguay GNL del Plata FSRU 5.5 Gas Sayago, Mitsui OSK Lines 2018
Bahrain Bahrain LNG FSU*+Onshore 8.2 Bahrain LNG 2019
India Ennore LNG 6.8 Indian Oil Corp. 2019
India Jafrabad FSRU 6.7 Swan Energy, Exmar 2019
Brazil Sergipe FSRU 7.6 Golar GenPower 2020
Total 117.7
Notes: * FSU = floating storage unit; GSPC = Gujarat State Petroleum Corporation; JAPEX = Japan Petroleum Exploration Co. Ltd.; SLNG =
Singapore LNG.
Source: IEA compilation based on information from companies’ websites and own estimates.
China already had 14 operating LNG terminals with total capacity of 68 bcm by the end of 2016, and
is commissioning two new terminals with capacity of 8.1 bcm. Three new LNG import terminals are
under construction and two existing LNG receiving terminals are constructing facilities for expansion,

T RADE
and these five terminals will have 11.8 bcm in total capacity and come on line by 2018. Total
regasification capacity will reach almost 90 bcm by 2018.
Regasification capacity in India is also increasing rapidly. By the end of 2016, India had four operating
LNG terminals with total capacity of 40 bcm. Five new LNG import terminals with total capacity of
around 30 bcm, including three FSRUs, are under construction and will come on line by 2019. Two of
them are located on the east coast of India and will enhance and strengthen the country’s gas
infrastructure.
One-third of the additional regasification capacity is in new markets and demand centres, Bahrain,
Bangladesh, Ghana, Haiti, Namibia, Panama, Philippines and Uruguay. With FSRUs and small-scale
terminals becoming more popular, starting LNG imports is becoming a much faster process. More
than half of these countries are installing floating infrastructures, and these new players are taking
advantage of lower gas prices for their growing gas demands.

T RADE
References
BP (2017), “Shah Deniz Stage 2”,
www.bp.com/en_az/caspian/operationsprojects/Shahdeniz/SDstage2.html (accessed 24 May 2017).
EC (European Commission) (2017), “Antitrust: Commission invites comments on Gazprom
commitments concerning Central and Eastern European gas markets”, www.europa.eu/rapid/press-
release_IP-17-555_en.htm (accessed 14 March 2017).
EC (2016), Commission Decision of 28.10.2016 on review of the exemption of the Ostseepipeline-
Anbindungsleitung from the requirements on third party access and tariff regulation granted under
Directive 2003/55/EC,
www.ec.europa.eu/energy/sites/ener/files/documents/2016_opal_revision_decision_en.pdf
(accessed on 28 October 2016).
EIA (2017a), U.S. Natural Gas Exports and Re-Exports by Country (database),
www.eia.gov/dnav/ng/ng_move_expc_s1_a.htm (accessed 10 April 2017).
EIA (2017b), Drilling Productivity Report, www.eia.gov/petroleum/drilling/,
www.eia.gov/petroleum/drilling/ (accessed 19 April 2017).
GIIGNL (International Group of LNG Importers) (2017), The LNG Industry GIIGNL ANNUAL REPORT
2017, GIIGNL, Paris,
www.giignl.org/sites/default/files/PUBLIC_AREA/Publications/giignl_2017_annual_report_0.pdf.
www.icis.com/energy/liquefied-natural-gas/lng-edge/.
IEA (2017a), Natural Gas Information (database), OECD/IEA, Paris, www.iea.org/statistics/ (accessed
on 14 June 2017).
IEA (2017b), Gas Trade Flows (database), OECD/IEA, Paris, www.iea.org/gtf (accessed on
14 June 2017).
IEA (2016), Global Gas Security Review 2016, OECD/IEA, Paris,
www.iea.org/publications/freepublications/publication/GlobalGasSecurityReview2016.pdf.
Naftogaz (2017), Natural Gas Consumption in Ukraine, www.naftogaz-
europe.com/article/en/naturalgasconsumption19912016 (accessed 14 June 2017).
TAP (Trans Adriatic Pipeline AG) (2017), “TAP celebrates 1st year of construction”, www.tap-
ag.com/news-and-events/2017/05/16/tap-celebrates-1st-year-of-construction (accessed
26 May 2017).
TransCanada (2017), “TransCanada announces successful Canadian Mainline Open Season results”,
www.transcanada.com/en/announcements/2017-03-13transcanada-announces-successful-canadian-
mainline-open-season-results/ (accessed 26 May 2017).

T HE ESSENTIALS
4. THE ESSENTIALS
Table 4.1 World gas demand by region and key country (bcm)
Country 2000 2010 2016* 2018 2020 2022
OECD Americas 801 856 973 991 1 012 1 028
United States 661 683 778 790 805 816
OECD Europe 477 575 507 509 507 505
G4 300 325 281 281 276 273
Western Europe 401 462 390 392 387 383
Central and Souteast Europe 62 90 95 97 98 101
OECD Asia Oceania 131 192 218 213 211 206
Japan 83 109 123 118 111 107
China 25 106 205 245 292 339
Non-OECD Asia 154 288 312 330 352 375
India 28 64 55 62 70 79
ASEAN 88 150 171 174 181 186
FSU/non-OECD Europe 597 680 654 655 658 662
Russia 391 466 456 452 452 452
Caspian Region 82 105 120 124 127 130
Non-OECD Europe 32 30 27 27 27 28
Middle East 174 369 471 495 517 542
Iran 62 144 185 194 204 216
Qatar 11 26 49 54 54 56
Saudi Arabia 38 73 88 92 95 98
Africa 56 106 127 137 146 153
Algeria 20 27 39 41 42 45
Egypt 18 44 53 58 63 65
Latin America 91 139 163 166 171 176
Brazil 9 27 37 34 33 33
Total 2 505 3 310 3 629 3 740 3 866 3 986
Note: 2016* figures are estimates and demand and supply for 2016 do not match as a result of stock changes. Figures can be different
compared to previous reports due to statistical differences, rounding and stock changes.
G4: France, Germany, Italy and the United Kingdom.
Western Europe: Austria, Belgium, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, United Kingdom,
Switzerland.
Central and Southeast Europe: Czech Republic, Estonia, Greece, Hungary, Latvia, Poland, Slovak Republic, Slovenia and Turkey.
ASEAN: Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Viet Nam.
China includes Hong Kong.
Caspian region: Armenia, Azerbaijan, Georgia, Kazakhstan, Kyrgyz Republic, Tajikistan, Turkmenistan, Uzbekistan.
Non-OECD Europe: Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Gibraltar, Lithuania, Former Yugoslav Republic of Macedonia, Malta,
Montenegro, Romania, Serbia.

T HE ESSENTIALS
Table 4.2 World sectoral gas demand by region (bcm)

Country 2000 2010 2016* 2018 2020 2022
OECD Americas 801 856 973 991 1 012 1 028
Residential/commercial 263 255 246 252 254 255
Industry 235 184 202 212 219 225
Power Generation 192 280 374 370 378 382
OECD Europe 477 575 507 509 507 505
Industry 137 119 117 118 120 121
Industry 25 36 37 38 39 40
China 25 106 205 245 292 339
Industry 11 32 63 78 96 110
Non-OECD Asia 154 288 312 330 352 375
Industry 44 83 100 112 124 137
Industry 91 118 114 116 118 121
Middle East 174 369 471 495 517 542
Industry 56 122 151 159 168 177
Africa 56 106 127 137 146 153
Industry 12 25 29 32 35 37
Latin America 91 139 163 166 171 176
Industry 30 53 52 53 55 57
Total 2 505 3 310 3 629 3 740 3 866 3 986
Note: 2016* figures are estimates, and demand and supply for 2016 do not match as a result of stock changes. This table does not show
other sectors such as energy industry own use, transport and losses. The industry sector includes gas use by fertiliser producers.

T HE ESSENTIALS
Table 4.3 World gas production by region and key country (bcm)
Country 2000 2010 2016* 2018 2020 2022
OECD Americas 765 817 958 1 000 1 060 1 099
United States 544 604 749 791 851 890
OECD Europe 303 308 254 239 228 218
Norway 53 112 121 121 121 119
Australia 33 53 98 125 133 135
China 27 96 137 159 181 200
Non-OECD Asia 221 332 336 323 308 312
India 28 51 30 30 31 31
ASEAN 160 222 242 231 219 226
Russia 573 657 647 657 666 683
Caspian Region 118 150 186 198 215 227
Non-OECD Europe 16 14 13 13 14 17
MIDDLE EAST 196 463 583 598 623 651
Iran 59 144 188 195 207 223
Qatar 24 121 171 169 171 175
Saudi Arabia 38 73 88 92 95 98
Africa 124 210 202 223 232 237
Algeria 82 85 91 92 93 94
Egypt 18 57 43 60 66 69
Latin America 99 155 173 176 175 177
Argentina 41 42 42 43 45 46
Brazil 7 15 25 28 27 28
Total 2 503 3 284 3 615 3 740 3 866 3 986
Note: 2016* figures are estimates and demand and supply for 2016 do not match as a result of stock changes. Figures can be different
compared to previous reports due to statistical differences, rounding and stock changes.
G4: France, Germany, Italy and the United Kingdom.
Western Europe: Austria, Belgium, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, United Kingdom,
Switzerland.
Central and Southeast Europe: Czech Republic, Estonia, Greece, Hungary, Latvia, Poland, Slovak Republic, Slovenia and Turkey.
ASEAN: Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Viet Nam.
China includes Hong Kong.
Caspian region: Armenia, Azerbaijan, Georgia, Kazakhstan, Kyrgyz Republic, Tajikistan, Turkmenistan, Uzbekistan.
Non-OECD Europe: Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Gibraltar, Lithuania, Former Yugoslav Republic of Macedonia, Malta,
Montenegro, Romania, Serbia.

T HE ESSENTIALS
Table 4.4 Fuel prices (USD/MBtu)

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Natural gas
Henry Hub 6.98 8.86 3.95 4.39 4.00 2.75 3.73 4.39 2.61 2.49
NBP 6.03 10.74 4.77 6.56 9.02 9.48 10.64 8.25 6.53 4.66
German border price 8.00 11.61 8.53 8.03 10.62 11.09 10.73 9.11 6.61 4.93
Japan LNG 7.74 12.66 9.04 10.90 14.78 16.70 16.05 16.25 10.26 6.90
Oil
WTI 12.46 17.18 10.63 13.69 16.36 16.23 16.88 16.01 8.41 7.47
Brent 12.50 16.72 10.60 13.70 19.18 19.25 18.73 17.07 9.25 7.77
JCC 11.90 17.65 10.45 13.65 18.81 19.79 19.03 18.14 9.49 7.22
Coal
US Appalachian 1.81 4.27 2.07 2.67 3.07 2.43 2.46 2.42 1.97 2.10
NW European steamcoal 3.72 6.18 2.96 3.82 5.10 3.89 3.43 3.16 2.34 2.51
Asian Coal marker 3.55 6.22 3.31 4.43 5.28 4.43 3.82 3.27 2.63 2.99
Table 4.5 Relative fuel prices (HH 2007/WTI 2007/US APP 2007 = 1)
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Natural gas
Henry Hub 1.00 1.27 0.57 0.63 0.57 0.39 0.53 0.63 0.37 0.36
NBP 0.86 1.54 0.68 0.94 1.29 1.36 1.52 1.18 0.94 0.67
German border price 1.15 1.66 1.22 1.15 1.52 1.59 1.54 1.31 0.95 0.71
Japan LNG 1.11 1.81 1.30 1.56 2.12 2.39 2.30 2.33 1.47 0.99
Oil
WTI 1.00 1.38 0.85 1.10 1.31 1.30 1.35 1.28 0.67 0.60
Brent 1.00 1.34 0.85 1.10 1.54 1.54 1.50 1.37 0.74 0.62
JCC 0.96 1.42 0.84 1.10 1.51 1.59 1.53 1.46 0.76 0.58
Coal
US Appalachian 1.00 2.36 1.14 1.48 1.70 1.34 1.36 1.34 1.09 1.16
NW European steamcoal 2.06 3.41 1.64 2.11 2.82 2.15 1.90 1.75 1.29 1.39
Asian Coal marker 1.96 3.44 1.83 2.45 2.92 2.45 2.11 1.81 1.45 1.65
Sources: IEA, ICE, German Customs, Japanese Customs, EIA, Bloomberg, McCloskey, Federal Reserve and European Central Bank.
Notes: All prices are yearly averages, of their respective average monthly prices. To convert oil prices in USD/bbl, the prices in USD/MBtu
have to be multiplied by 5.8. To covert coal prices in USD/ton (6 000 kcal), the prices in USD/MBtu have to be multiplied by 23.8.

T HE ESSENTIALS
Table 4.6 LNG liquefaction capacity operating and under construction as of June 2017 (bcm/year)
Region Operation Construction
OECD Asia Oceania 89 29
Australia 89 29
Non-OECD Asia 104 8
Brunei 10 -
Indonesia 43 6
Malaysia 41 2
Papua New Guinea 9 -
OECD Europe 6 -
Norway 6 -
FSU/non-OECD Europe 15 22
Russia 15 22
Middle East 136 -
Oman 14 -
Qatar 105 -
United Arab Emirates 8 -
Yemen 9* -
Africa 97 2
Algeria 38 -
Angola 7 -
Cameroon - 2
Egypt 17 -
Equatorial Guinea 5 -
Nigeria 30 -
OECD Americas 14 78
United States 14 78
Latin America 27 -
Peru 6 -
Trinidad and Tobago 21 -
Total 487 139
* Refers to capacity currently offline due to technical or security issues.

T HE ESSENTIALS
Table 4.7 LNG regasification capacity operating and under construction as of June 2017 (bcm/year)
Region Operation Construction
OECD Asia Oceania 438 3
Japan 275 3
Korea 163 -
Non-OECD Asia (excluding China) 97 67
Bangladesh - 5
Chinese Taipei 18 1
India 40 30
Indonesia 11 -
Malaysia 5 5
Pakistan 7 8
Philippines - 4
Singapore 8 7
Thailand 7 7
China 76 12
OECD Europe 228 3
Belgium 9 -
Finland 0.1 1
France 34 -
Greece 5 2
Israel 3 -
Italy 15 -
Netherlands 12 -
Poland 5 -
Portugal 8 -
Spain 67 -
Sweden 1 1
Turkey 20 -
United Kingdom 49 -
FSU/non-OECD Europe 5 -
Lithuania 4 -
Malta 1 -
Middle East and Africa 39 19
Bahrain - 8
Jordan 5 -
Kuwait 8 -
United Arab Emirates 13 -
Egypt 13 -
Ghana - 5
Namibia - 6
OECD Americas 197 -
Canada 12 -
Chile 8 -
Mexico 23 -
United States 153 -
Latin America 37 14
Argentina 12 -
Brazil 13 8
Colombia 5 -
Dominican Republic 2 -
Haiti - 0.4
Jamaica 0.3 -
Panama - 1
Puerto Rico 4 -
Uruguay - 6
Total 1 116 118

G LOSSARY
GLOSSARY
Regional and country groupings
Africa
Algeria, Angola, Benin, Botswana, Cameroon, Congo, Democratic Republic of Congo, Côte d’Ivoire,
Egypt, Eritrea, Ethiopia, Gabon, Ghana, Kenya, Libya, Morocco, Mozambique, Namibia, Nigeria,
Senegal, South Africa, Sudan, United Republic of Tanzania, Togo, Tunisia, Zambia, Zimbabwe and
other African countries and territories1.
ASEAN
Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore,
Thailand and Viet Nam.
Caspian region
Armenia, Azerbaijan, Georgia, Kazakhstan, Kyrgyz Republic, Tajikistan, Turkmenistan and Uzbekistan.
China
Refers to the People’s Republic of China, including Hong Kong.
FSU/non-OECD Europe
Albania, Armenia, Azerbaijan, Belarus, Bosnia and Herzegovina, Bulgaria, Croatia, Lithuania, the
Former Yugoslav Republic of Macedonia, Georgia, Kosovo, Kyrgyzstan, the Republic of Moldova,
Montenegro, Romania, Russian Federation, Serbia, Tajikistan, Turkmenistan, Ukraine and Uzbekistan.
For statistical reasons, this region also includes Cyprus2, Gibraltar and Malta.
Individual data are not available and are estimated in aggregate for: Burkina Faso, Burundi, Cape Verde, Central African Republic, Chad,
1
Comoros ,Djibouti, Equatorial Guinea, Gambia, Guinea, Guinea-Bissau, Lesotho, Liberia, Madagascar, Malawi, Mali, Mauritania, Mauritius, Niger,
Reunion, Rwanda, Sao Tome and Principe, Seychelles, Sierra Leone, Somalia, Swaziland and Uganda.
1. Note by Turkey
2
The information in this document with reference to “Cyprus” relates to the southern part of the Island. There is no single authority representing
both Turkish and Greek Cypriot people on the Island. Turkey recognises the Turkish Republic of Northern Cyprus (TRNC). Until a lasting and
equitable solution is found within the context of United Nations, Turkey shall preserve its position concerning the “Cyprus issue”.
2. Note by all the European Union Member States of the OECD and the European Union
The Republic of Cyprus is recognised by all members of the United Nations with the exception of Turkey. The information in this document relates
to the area under the effective control of the Government of the Republic of Cyprus.

G LOSSARY
European Union
Austria, Belgium, Bulgaria, Croatia, Cyprus3, Czech Republic, Denmark, Estonia, Finland, France,
Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland,
Portugal, Romania, the Slovak Republic, Slovenia, Spain, Sweden and the United Kingdom.
Latin America
Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Cuba, the Dominican Republic, Ecuador, El
Salvador, Guatemala, Haiti, Honduras, Jamaica, Netherlands Antilles, Nicaragua, Panama, Paraguay,
Peru, Trinidad and Tobago, Uruguay, Venezuela and other non-OECD Americas countries and
territories4.
Middle East
Bahrain, the Islamic Republic of Iran, Iraq, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, the
Syrian Arab Republic, the United Arab Emirates and Yemen.
Non-OECD Asia
Bangladesh, Brunei Darussalam, Cambodia, Chinese Taipei, India, Indonesia, the Democratic People’s
Republic of Korea, Malaysia, Mongolia, Myanmar, Nepal, Pakistan, the Philippines, Singapore, Sri
Lanka, Thailand, Viet Nam and other Asian countries and territories5. Excludes China.
North Africa
Algeria, Egypt, Libya, Morocco and Tunisia.
North America
Canada, Mexico and United States.
OECD
Includes OECD Europe, OECD Americas and OECD Asia Oceania regional groupings.
1. Note by Turkey
3
The information in this document with reference to “Cyprus” relates to the southern part of the Island. There is no single authority representing
both Turkish and Greek Cypriot people on the Island. Turkey recognises the Turkish Republic of Northern Cyprus (TRNC). Until a lasting and
equitable solution is found within the context of United Nations, Turkey shall preserve its position concerning the “Cyprus issue”.
2. Note by all the European Union Member States of the OECD and the European Union
The Republic of Cyprus is recognised by all members of the United Nations with the exception of Turkey. The information in this document relates
to the area under the effective control of the Government of the Republic of Cyprus.
4
Individual data are not available and are estimated in aggregate for: Antigua and Barbuda, Aruba, Bahamas, Barbados, Belize, Bermudas, British
Virgin Islands, Cayman Islands, Dominica, Falkland Islands (Malvinas), French Guyana, Grenada, Guadeloupe, Guyana, Martinique, Montserrat,
St. Kitts and Nevis, Saint Lucia, Saint Pierre et Miquelon, St. Vincent and the Grenadines, Suriname and Turks and Caicos Islands.
Individual data are not available and are estimated in aggregate for: Afghanistan, Bhutan, Cook Islands, Fiji, French Polynesia, Kiribati, the Lao
5
People’s Democratic Republic, Macau (China), Maldives, New Caledonia, Palau, Papua New Guinea, Samoa, Solomon Islands, Timor-Leste,
Tonga and Vanuatu.

G LOSSARY
OECD Americas
Canada, Chile, Mexico and United States.
OECD Asia Oceania

Australia, Japan, Korea and New Zealand.
OECD Europe
Austria, Belgium, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary,
Iceland, Ireland, Italy, Latvia, Luxembourg, Netherlands, Norway, Poland, Portugal, Slovak Republic,
Slovenia, Spain, Sweden, Switzerland, Turkey and United Kingdom. For statistical reasons, this region
also includes Israel6.
South America
Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Falkland Islands (Malvinas), French Guyana,
Guyana, Paraguay, Peru, Suriname, Uruguay and Venezuela.
List of acronyms, abbreviations and units of measure

Acronyms and abbreviations
AUD Australian dollars
BNetzA Bundesnetzagentur
CBM Coalbed methane
CCGT Combined-cycle gas turbines
CEC Clean energy certificates
CFE Comisión Federal de Electricidad
CNG Compressed natural gas
CNOOC China National Offshore Oil Corporation
CNPC China National Petroleum Corporation
COAG Council of Australian Governments
CPF Carbon price floor
EC European Commission
EGAS Egyptian Natural Gas Holding Company
ENI Ente Nazionale Idrocarburi
EOR Enhanced oil recovery
The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD
6
and/or the IEA is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of
international law.

G LOSSARY
EU European Union
EUA European Union emissions allowance
FID Final investment decision
FIFA Fédération Internationale de Football Association
FLNG Floating LNG
FOB Free on board
FSRU Floating storage gasification units
FSU Former Soviet Union
FYP Five-Year Plan
GBP Great Britain Pound
GDP Gross domestic product
GIIGNL International Group of Liquefied Natural Gas Importers
GLNG Gladstone LNG
GSA Gas supply agreements
GW Gigawatt
HH Henry Hub
HoA Heads of agreement
IEA International Energy Agency
IMF International Monetary Fund
IOC International oil companies
JAGAL Jamal-Gas-Anbindungsleitung (pipeline)
KEPCO Korea Electric Power Corporation
KOGAS Korea Gas Corporation
LNG Liquefied natural gas
MLNG Malaysia LNG
MW Megawatt
NBP National Balancing Point
NDRC National Development and Reform Commission
NEL Nordeuropäische Erdgas Leitung (pipeline)
NGV Natural gas vehicles
NIOC National Iranian Oil Company
NPP Nuclear power plants
NRA Nuclear Regulation Authority
NTP National Transformation Program
OECD Organisation for Economic Co-operation and Development
OPAL Ostsee-Pipeline-Anbindungsleitung (pipeline)
OPEC Organization of the Petroleum Exporting Countries
PGNiG Polskie Górnictwo Naftowe i Gazownictwo
PSEEZ Pars Special Economic Energy Zone
PV Photovoltaics
QP Qatar Petroleum
SCPX South Caucasus Pipeline Expansion
STEGAL Sachsen-Thüringen-Erdgas-Anbindungsleitung
TAP Trans Adriatic Pipeline
TAPI Turkmenistan-Afghanistan-Pakistan-India pipeline
TANAP Trans Anatolian Pipeline

G LOSSARY
TEPCO Tokyo Electric Power Company

TPA Third-party access
TTF Title Transfer Facility
USD United States dollars
YPFB Yacimiento Petrolíferos Fiscales Bolivianos
Units of measure
Bbl barrel
Bcm billion cubic meter
GW gigawatt
Kcal kilocalories
m3 cubic metre
MBtu million British thermal units
MJ megajoule
Mt million tonnes
Mtpa million tonnes per annum
MW megawatt
MWh megawatt/hour
Tcm trillion cubic metres
TWh terawatt hour

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This publication reflects the views of the IEA Secretariat but does not necessarily reflect
those of individual IEA member countries. The IEA makes no representation or warranty,
express or implied, in respect of the publication’s contents (including its completeness or
accuracy) and shall not be responsible for any use of, or reliance on, the publication.
Unless otherwise indicated, all material presented in figures and tables
is derived from IEA data and analysis.
This document, as well as any data and any map included herein are without prejudice to
the status of or sovereignty over any territory, to the delimitation of international frontiers
and boundaries and to the name of any territory, city or area.
IEA Publications,
International Energy Agency
Website: www.iea.org
Contact information: www.iea.org/aboutus/contactus
Cover design: IEA. Photo credits: © GraphicObsession.

Typeset in France by IEA, July 2017.
IEA/OECD possible corrigenda on: www.oecd.org/about/publishing/corrigenda.htm .

GAS 2O17
The natural gas market is undergoing a fundamental transformation. Industry has

overtaken the power sector as the driving force behind the growing use of gas,
thanks to rising demand in places like the People’s Republic of China, developing
Asia, the Middle East and the United States. At the same time, structural changes
in gas supply and trade are changing the global gas market. Heavily oversupplied
markets, the ongoing shale-gas revolution in the United States, the second wave
of additional liquefaction capacity from Australia and the US, and the fast-growing
LNG trade are disrupting traditional gas business and pricing models. This is forcing
market players to redefine their strategies and explore new markets.
The IEA’s renamed Gas 2017 market report provides a detailed analysis of supply
and trade developments, infrastructure investments, and demand-growth forecast
through 2022. It assesses the main changes that will likely transform the gas
market, led by rising demand in countries that include China, India, and Pakistan,
thanks to ongoing economic growth and relatively low LNG prices. It also explores
widening regional differences to traditional gas users, with flat demand forecast in
Europe and structural demand decline in Japan.
Oversupplied markets will also keep pressure on prices and discourage new
upstream investment in gas production and LNG liquefaction capacity. At the
same time, market reforms in places like Egypt, Brazil, Argentina and Mexico have
the potential to bring new investments and technologies to unlock vast domestic
resources, creating new prospects for the gas industry.
€80 (61 2017 20 1E1)

ISSN: 2520-274X
ISBN: 978-92-64-27857-8
9HSTCQE*chifhi+

Gas 2017

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Marke t Report Series

Dr. Fatih Birol

G AS M ARKET R EPORT 2017 3

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US shale production is shaping pipeline exports .............................................................................. 99

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Figure 1.1 Global demand by sector, 2002-22

bcm bcm Change over period

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Figure 1.2 Relative evolution of OECD and non-OECD demand, 2002-22

16 G AS M ARKET R EPORT 2017

Table 1.1 Global demand by region, 2016-22

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Figure 1.3 Gas prices development, 2012-17

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Map 1.2 US gas consumption by region in 2015

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Figure 1.5 US power generation by type, 2004-22

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Figure 1.6 Gas consumption of US industry by selected sectors, 2010-22

22 G AS M ARKET R EPORT 2017

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Figure 1.8 Canadian gas consumption by sector, 2010-22

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Figure 1.9 Mexico’s fuel sources’ share by sector, 2000-15

80% 80% 80%

60% 60% 60%

40% 40% 40%

20% 20% 20%

Figure 1.10 Mexico’s power generation by type, 2004-22

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26 G AS M ARKET R EPORT 2017

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Box 1.4 Energiewende

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0 0 LNG import volumes

32 G AS M ARKET R EPORT 2017

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Figure 1.19 Share of industrial demand in Korea, 2000-15

Source: IEA (2017d), Natural Gas Information (database), www.iea.org/statistics/.

Box 1.5 Meeting demand with new LNG players in Korea

34 G AS M ARKET R EPORT 2017

Figure 1.20 Structure of the gas market in Korea (2015)

Source: IEA (2017d), Natural Gas Information (database), www.iea.org/statistics/.

G AS M ARKET R EPORT 2017 35

Map 1.3 LNG import facilities in Korea, 2017

36 G AS M ARKET R EPORT 2017

Box 1.6 Regional focus: Natural gas in China’s 13th FYP

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38 G AS M ARKET R EPORT 2017

Yangtze River Delta and other Eastern China region

G AS M ARKET R EPORT 2017 39