Global natural gas industry development status and trend analysis

I. Recent developments in the global natural gas market

(1) Mismatch between supply and demand in the natural gas market

Recently, global gas supply has lagged behind booming demand. On the supply side, the utilization rate of LNG export plants in the United States is close to full capacity, the growth potential of natural gas supply in Russia is limited, the domestic natural gas production in Europe continues to decline, and the natural gas inventories in the United States, Russia and Europe are lower than the average inventory level, which makes the market more sensitive and the concern about insufficient supply in winter deepens. On the demand side, driven by economic recovery, extreme climate, energy transition and other factors, natural gas demand in Europe has recovered growth, and natural gas demand in Asia has continued to grow rapidly. In the short term, the mismatch between supply and demand in the market is difficult to ease.

1. Tight global gas supply

In 2020, affected by the epidemic and the historic slump in international oil prices, the upstream production of natural gas has been hindered, the output of major natural gas producing countries such as the United States and Russia has declined, and the operation of liquefied projects has been delayed and investment has slowed down. BP data show that in 2020, the world's natural gas production of 3.85 trillion cubic meters, down 3.3%, of which the United States, Russia - Central Asia and Latin America production fell 15.4 billion cubic meters, 32.1 billion cubic meters and 19.4 billion cubic meters, respectively; In addition, natural gas exploration activity declined throughout the year, with global recoverable natural gas reserves of 188.1 trillion cubic meters, down 1.2% year-on-year.

LNG supply and project investment under the COVID-19 epidemic

Since 2021, with the gradual control of the epidemic and the resonance recovery of the global economy, natural gas production capacity has gradually climbed, but the repeated epidemic has made it impossible to fully recover the production capacity gap, and the continuous supply-side impact has led to the shortage of natural gas production capacity. In the face of rapidly rising demand, global gas supplies are tight.

From a regional supply perspective, the United States accounts for about 24% of global natural gas supply, making it the world's largest natural gas supplier. More than 80% of the US natural gas supply is used to meet domestic demand, and the rest is exported (915 BCM of production and 137 BCM of exports in 2020), with LNG mainly exported to Europe and the Asia-Pacific region and pipeline gas mainly exported to Canada and Mexico. With a certain percentage of natural gas reinjection each year (3,56bn cubic feet in 2020, or about 10% of its well gas production), the United States is relatively productive. In February 2021, the United States experienced extremely cold weather, widespread power outages in Texas and Ohio, damage to natural gas infrastructure, and rapid declines in natural gas production. In August, Hurricane "IDA" caused the United States Gulf Coast natural gas production to decline again, and the recovery of production is not as expected. In addition to emergencies to inhibit the short-term supply of natural gas, the current utilization rate of LNG export plants in the United States is close to full capacity, and its pipeline capacity to Canada and Mexico is difficult to convert into global LNG circulation, and the capacity of export facilities has become the main bottleneck of the supply of natural gas from the United States to the global market.

Russia accounts for about 17 percent of the world's natural gas supply, making it the second largest supplier after the United States. In addition to meeting domestic demand, more than one-third of Russia's natural gas supply is exported (638.5 billion cubic meters of supply in 2020, up to 238 billion cubic meters of export), most of which is piped gas /LNG to Europe, and the rest mainly to China, Japan, Belarus and other countries. Russia is expanding its LNG supply year by year, but its natural gas exports are still dependent on pipelines. Of Russia's pipeline capacity to Europe (210 billion m3 / year), transit through Ukraine accounts for about half. The recent attention of the international market on Russian natural gas is the progress of the operation of the "Nord Stream 2" natural gas pipeline, which is designed to carry 55 billion cubic meters/year of cross-border pipeline once put into use, will become the main channel for Russia to bypass Ukraine and other countries to export natural gas to Europe, when Russia's natural gas supply capacity to Europe will be greatly enhanced. On November 17, the German energy regulator suspended the approval process for Nord Stream 2, making it difficult for the pipeline to relieve pressure on European gas supplies this winter, and in the short term, the growth potential of Russian gas supplies on the international market is limited.

Europe is the world's largest natural gas importer, and its domestic gas production has continued to decline in recent years (around 219 billion cubic meters of production and 541 billion cubic meters of consumption in 2020). European gas production fell 10 per cent in the first half of the year. On the one hand, several gas fields in the North Sea are running out, as are some in the Netherlands. Groningen gas field in the Netherlands, an important gas field in Europe, will stop regular production in 2022 due to frequent earthquakes, which is estimated to affect about 5% of the total gas supply in Europe. On the other hand, in the context of carbon neutrality, European oil and gas companies have reduced their investment in upstream operations. Companies such as BP, Shell and Total have set targets to reduce the carbon intensity of their upstream operations and committed to becoming net zero emissions companies by 2050 or earlier, while overall investment and output by European oil and gas companies are declining, and overall regional self-sufficiency rates are falling sharply.