Under the background of demand recovery energy transition, the future development of global natural gas is foreseeable

Brazil's gas production on the market in June rose 4.5 percent year-on-year  1.7 percent month-on-month to 58 million cubic meters per day. The world's major economies continue to recover  energy demand has improved markedly as the global pandemic vaccine campaign continues. At the same time, the eu carbon emission permit futures price rose to more than 50 euros per ton,  China's carbon emission permit trading market was launched, which also further promoted the global process of "replacing coal with gas". Several agencies believe that better times are in store for natural gas.

Gas prices rose to multi-year highs

In the first half of 2021, WTI crude futures are up 51%  the start of the year, while Brent crude futures are up 45%, both recording their highest six-month gains since 2009. With the overall recovery of oil  gas market, the global process of "replacing coal with gas" has been further promoted with the eu carbon emission permit futures price rising to more than 50 euros per ton  China's carbon emission permit trading market launched on July 16,  the price of natural gas has also risen to a multi-year high. European gas prices were about 90% higher in July than at the start of the year, according to data. Spot LNG prices in Asia surged to a seasonal eight-year high earlier this month. The average price of Northeast Asian LNG delivered in August reached about $14 per million British thermal units, according to CNG.COM.

A newer report  the International Energy Agency expects benchmark gas prices in Europe to average $9.50 per million British thermal units this year, the highest level since 2013. Spot LNG prices in Asia will average $11 per million British thermal units, the highest since 2014.

Underpinning high gas prices is a strong pickup in demand. Although global natural gas demand declined by 1.9% in 2020, it is forecast to rebound by 3.6% in 2021, according to the International Energy Agency's Natural Gas Analysis  Outlook 2021-2024 (THE Report) released on July 8. Gas deliveries so far this year support that view. Total global LNG deliveries rose to 29.9 million tonnes in June  27 million tonnes in the same period last year,  remained above 30 million tonnes  November to May, according to oil analysis firm Vortexa. If strong growth in natural gas demand in 2021 was the result of the global recovery  the COVID-19 pandemic, demand growth since then has been driven by a combination of economic activity  fuel substitution.

In fact, there is no doubt about the importance of natural gas in the energy transition. It can  only play an important role in solving the intermittent  unstable problems of wind power  photovoltaic power generation, but also play a bridge role in the energy transition. Unless there are major policy changes to limit global gas consumption, gas demand will continue to grow in the coming years, reaching nearly 4.3 trillion cubic meters by 2024, an increase of 7 percent  pre-pandemic levels, according to the report.

The Middle East will lead the supply growth

While demand for gas is expected to grow rapidly in the future, driven by the continued recovery of the global economy  the global adoption of low-carbon strategies, the risk of a tight market structure does  increase. Conventional projects already approved  under development are generally believed to meet most of the additional needs.

In terms of gas supply distribution, the Middle East, dominated by Qatar, Saudi Arabia, the United Arab Emirates  Iran, will become the region with the largest growth in global gas supply. According to the report, future additional gas supplies will come almost entirely  large conventional assets already under development, mainly in the Middle East  Russia. Based on new projects planned  announced between 2021  2025, the Middle East will account for approximately 37% of global gas processing capacity growth by 2025, leading the global gas processing industry capacity growth, according to a recent report  data analytics firm GlobalData. By 2025, the Middle East will have 594 million m3 of new gas processing capacity, of which 549 million m3 will come  approved planned projects  the rest  announced projects that have  been approved.

In fact, As a major Middle East gas producer, Qatar's LNG exports have remained resilient even in 2020, when the country was hit hard by the pandemic -- ranking first in global exports for a second year. This year, Qatar has taken a number of steps to expand its market share. The $28.75bn North East project, approved in February, was the largest LNG project approved in recent years, followed by the formation of a trading team in May ready to aggressively compete for Asian spot market share.

Russia  the US will also be important suppliers to meet the new demand. Prime Minister Sergei Mishustin approved a long-term LNG development plan in March that envisages quadrupling Russia's LNG production capacity  current levels to 140 million tons a year by 2035, accounting for 20 percent of the global LNG market. According to GlobalData, Russia will see the second highest growth in gas processing capacity, adding 453 million cubic meters of gas processing capacity by 2025. Of these, the Ust-Luga integrated gas facility in the Leningrad region will be the most productive of the gas processing plants in the region (with an estimated gas processing capacity of 122 million cubic meters). On the US side, new investments in shale gas production will also be in place to support LNG export capacity. The report sees the US accounting for the vast majority of new LNG capacity over the next three years. According to GlobalData, North America will be the third largest gas processing capacity growth region in the world by 2025 with 351 million m3 of new gas processing capacity.

Supply will transition to low carbon

Under the net zero emission target, only the reduction of greenhouse gas emission intensity across the whole value chain can support the sustainable development of natural gas in the future. Carbon neutral LNG, obtained through carbon offsets, as a product of the new green recovery idea, has become an important way out for the development of natural gas. More  more oil  gas companies have recently joined the carbon-neutral LNG trade. Sempra Energy announced on July 15 that it has signed a contract with BP to supply carbon-neutral LNG, the first of which arrived on July 16. All carbon dioxide  methane emissions associated with the production of the LNG will be offset by carbon credits  a BP silviculture project in Mexico. Shell  petrochina also recently signed the world's first term contract for carbon neutral LNG for a period of five years.

In addition, the development of carbon management solutions to significantly reduce emissions  combustion is another way to make the transition to low carbonization of natural gas. The report also argues that reducing methane emissions is an effective way to reduce our carbon footprint, both in terms of time  cost. The IEA's methane tracker analysis shows that up to 40% of methane emissions can now be avoided at no net cost.

Many oil  gas companies also recognize the importance of reducing combustion  methane emissions. Exxonmobil has proposed internal rules to strengthen methane regulation,  in its Energy  Carbon Summary released in December 2020, it set a goal of reducing methane intensity by 40 to 50 percent  combustion intensity by 35 to 45 percent by 2025. Total is also committed to reducing methane emissions, successfully achieving an 80% reduction in associated gas flares in 2017  committing to eliminate all associated gas flares in its operating facilities by 2030. Chevron plans to reduce methane intensity by 50 percent  flaring intensity by 65 percent by 2028 compared to 2016, with no conventional flaring by 2030.

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Source: International gas network