BP: gas consumption touched new record in 2010

Demand for all forms of energy grew strongly in 2010 and increases in fossil fuel consumption, BP reported in its last “Statistical Review of World Energy” report released on 8-Jun-2011.

“The growth in energy consumption was broad-based, with both mature OECD economies and non-OECD countries growing at above-average rates. There were both structural and cyclical factors at work. The cyclical factor is reflected in the fact that industrial production rebounded very sharply as the world recovered from the global downturn. Structurally, the increase reflects the continuing rapid economic growth in the developing world,” said Bob Dudley, BP CEO.

Consumption growth reached 5.6%, the highest rate since 1973. It increased strongly for all forms of energy and in all regions. Total consumption of energy in 2010 easily surpassed the pre-recession peak reached in 2008, according to the BP’s statistical report.

Globally, energy consumption grew more rapidly than the economy, meaning that the energy intensity of economic activity increased for a second consecutive year. The data imply that global CO2 emissions from fossil fuel consumption will also have grown strongly last year, BP said.

BP has highlighted that China became the world’s largest energy consumer in 2010 overtaking the US during a year which saw the rebound in the global economy drive consumption higher and at a rate not seen since the aftermath of the 1973 oil price shocks. Chinese energy consumption grew by 11.2% in 2010.

Oil remains the world’s leading fuel, at 33.6% of global energy consumption, but it continued to lose market share for the 11th consecutive year. Global oil consumption grew by 3.1%, the strongest growth since 2004, BP reported.

Christof Rühl, BP’s group chief economist said that gas consumption rose 7.4%, the strongest volumetric gain on record. Non-OECD economies expanded their share to over 51%; China solidified its role as Asia’s largest gas market. But OECD markets grew rapidly too (6.4%, +93 BCM), with consumption attaining all-time highs. Production rose 7.3%, also a record increment. 31% of this global growth originated in the former Soviet Union, followed by the Middle East.

BP has also reported that global natural gas trade increased by a robust 10.1% in 2010. A 22.6% increase in LNG shipments was driven by a 53.2% increase in Qatari shipments.

Among LNG importers, the largest volumetric growth was in South Korea, the UK and Japan. LNG now accounts for 30.5% of global gas trade. Pipeline shipments grew by 5.4%, led by growth in Russian exports.

“The shale gas revolution in the US and massive changes in LNG markets are reshaping the world of natural gas,” said Rühl. Over the last five years, global LNG supply grew by a cumulative 58% - three times faster than total gas production. And last year, the supply of LNG expanded by an unprecedented 22.6% (55 BCM).

EIA reported that energy prices going up in 2010:

• Natural gas prices are expected to rise through 2011, the US EIA said in its short-term energy outlook on 12-Jan as a steady economic recovery in the US is expected to fuel a rise in demand in 2010 and 2011.

• Due to the expected declines in gas production and imports this year, the US EIA increased its first-quarter Henry Hub spot price forecast by 21%, to $5.56/MCF. EIA predicted a full-year 2010 average price of $5.36/MCF up 16%, from its previous outlook report published in December and $1.30/MCF higher than the 2009 average of $4.06/MCF. The agency said it expects gas prices to continue rising in 2011, averaging $6.12/MCF.

• US gas production rose 3.7% in 2009 despite a 59% downturn in the working gas rig count from September 2008 to July 2009, EIA said. It attributed the modest growth to the enhanced productivity of new wells in unconventional plays—but it predicted steep declines from initial levels at those same wells, which should contribute to a 3% drop in overall 2010 production.

• Gas consumption is predicted to be almost unchanged this year, the US EIA said. “Higher natural gas prices in 2010 are expected to cause a 2.8% decline in gas consumption in the electric power sector in 2010, which will offset growth in the residential, commercial and industrial sectors,” The US EIA added.  The weak economy cut gas use by 1.5% in 2009, however, the agency predicts that gas demand will remain nearly steady through 2011, when it is expected to rise just 0.4%.

On 10 Feb. 2010, the US EIA predicted that LNG imports in 2010 as a whole are expected to rise versus 2009, as production comes online in Russia, Indonesia, Yemen and Qatar. However, imports are seen falling in 2011 as demand in Europe and Asia picks up and helps suck some cargoes away from US market.

EIA: US LNG imports may increase 42% in 2010

• The US LNG imports may rise 42 percent in 2010 to approximately 1.76 BCF/D (12.8 MMT/Y), the country’s energy information watchdog, EIA said in its monthly short-term energy outlook (STEO) in April. However, the latest estimate for 2010 imports was 2.2 percent lower than the previous forecast when the EIA had projected imports of 1.8 BCF/D (13.1 MMT/Y).

• While the EIA expects the LNG imports to increase by about 3.65 MMT this year over last, the failure of global demand to keep pace with increased global supply could lead to even higher US LNG imports than currently forecast, the EIA said.  The EIA has also estimated that the US LNG imports in 2011 may rise 2.8 percent to 1.81 BCF/D (13.2 MMT/Y).

• According to the STEO, the Henry Hub natural gas spot price is expected to average $4.44/MMBTU this year. Though considerably less then the average price of $5.17/MMBTU projected for 2010 in last month’s STEO, this projection is $0.49/MMBTU more than the 2009 average.

• Total natural gas consumption is expected to increase by 1.9 percent to average 63.8 BCF/D in 2010. During the first quarter of 2010, cold weather contributed to year-over-year increases in natural gas consumption in the electric power sector. In addition, industrial consumption increased as economic conditions improved. The STEO predicts total natural gas consumption will decline by 0.6 percent in 2011, as the predicted return of near-normal weather will likely reduce residential and commercial consumption. Conversely, the STEO predicts industrial consumption will increase by 1.7 percent in 2011, likely as a result of continued economic growth.

• The US marketed production is expected to increase by roughly 1 percent to 60.9 BCF/D in 2010 and decrease by 0.7 BCF/D or 1.2 percent in 2011.

LNG excess capacity may be removed by 2020:

World’s LNG excess production capacity may plunge to less than 5 percent in 2020 from about 30 percent last year because strong demand for LNG over the coming decade, creating room for supplies from proposed project in Australia, Sanford C. Bernstein & Co. said on 12-Jul. “While there is an excess of liquefaction capacity following the startup of Qatar LNG projects, this is only a temporary phenomenon.”

LNG spare capacity was about 15 percent in 1998 then declined to less than 5 percent in 2003, it may rise to about 15 percent in 2017 before declining again to less than 5 percent in 2020, according to Bernstein.

On 20 Jul., Bentek Energy consulting company said that the prompt-month NYMEX natural gas futures contract is unlikely to average higher than $5/MMBTU in any year between 2010 and 2015 as the result of a long-term shift in market fundamentals.

Bentek has predicted an average price of $4.66/MMBTU over the five-year period, including a peak of $4.92/MMBTU in 2013.

LNG spot & short-term trade grew 40% in 2010:

World spot and short-term LNG trades recorded a very strong increase 40% YoY and reach 727 cargoes [37 MMT] in 2010, compared with 491 cargoes [26.4 MMT] in 2009, accounting for 18.9% of the world total LNG trade, compared with 16.3% in 2009, according to GIIGNL’s report.

The rise of spot and short-term operations was particularly significant in Europe (+50.9%), thanks to the attractiveness of LNG prices compared with long-term prices and to the availability of uncommitted LNG supply from the Middle East, mainly Qatari new commissioned LNG plants.

Qatar overtook Trinidad’s leadership in this kind of trade and came first with a 25.7% share, followed by Trinidad (17.2%), Nigeria (12.3%) and Egypt (7.3%). In 2010, new flexible volumes from Qatar contributed to 45.3% of the new spot and short-term volumes on the market, followed by Nigeria (18.8%) and Yemen (12.6%).

Asia experienced renewed growth in spot and short-term purchases after a sharp decline in 2009, with 16.1 MMT. Despite a 17% increase, Asian spot and short-term imports remained behind their 21.4 MMT level of 2008, a large portion of extra Asian supplies being provided by long-term contracts.

“Korea and Japan alone accounted for 38.2% of additional spot and short-term volumes. By way of comparison, Europe was responsible for 38.5% of additional spot and short-term quantities," GIIGNL reported.

The association reported that Spot and short-term trading of LNG in 2010 was also marked by the growing activity of non asset-based players, including financial institutions and oil trading companies, as well as by the significant number of re-exported cargoes.

A total of 19 cargoes were re-loaded during the year (7 from Zeebrugge, 8 from Sabine Pass and 4 from Freeport LNG).

Noteworthy is the fact that in 2010, only 9 cargoes out of 19 were re-exported to countries located east of the Suez Canal, 10 remaining dedicated to the Atlantic Basin west of the canal.

Japan remained the leading LNG importer with 2,369 cargoes in 2010, a gain of 8.7% on 2,179 shipments in 2009, but its share of global LNG trade dropped slightly YoY to 31.7%, from 35.3% in 2009.

"In 2010, India was the only Asian country to reduce its appetite for LNG, as a result of growing domestic production," GGIGNL said, however, market analysts has predicted that Indian LNG imports will be increased this year as the indigenous gas production is declining.

The appetite for LNG in South America grew strongly, mainly as a result of gas demand for power generation. Imports by Argentina, Brazil, and Chile “almost tripled and reached 194 cargoes, bringing South America's global LNG market share to 2.6% at the end of 2010,” GIIGNL said.

The world trade involved 149 “flows” (i.e. country-to-country trades) over 386 sea transportation routes (port-to-port routes). 100 routes were new and 73 ceased in 2010. In 2010, there were 42 new country-to-country flows.

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