Global natural gas industry development status and trend analysis

Finally, in the context of the low-carbon transformation of the global energy system, natural gas has obvious advantages over coal in terms of carbon emissions, and carbon trading costs continue to rise, fueling the demand for natural gas. At the end of 2020, the European Parliament agreed to raise the 2030 greenhouse gas reduction target from 40% to 55%, and carbon emission control is becoming more stringent. In July 2021, the European Commission put forward an energy and climate package called "Fit for 55", which proposes to further tighten the carbon trading market and reduce the total amount of carbon credits in the carbon market reform. As the policy continues to tighten, the price of carbon trading in the EU has soared. Data from the Intercontinental Exchange (ICE) show that as of the end of November, the EU carbon price has exceeded 70 euros/ton, compared with the price of 34 euros/ton when the fourth trading phase of the EU carbon market was launched on January 4, the EU carbon price has doubled this year. Because of the lower cost of carbon emissions from gas and electricity, as carbon prices rise, the demand for natural gas from power plants increases.

2. Natural gas prices hit record highs

Affected by factors such as supply and demand imbalance, extreme climate, and energy transition, global natural gas prices have risen all the way, and have become the largest increase in energy commodities this year. With a base period of March 2021, average monthly gas prices in Europe and Asia have increased by almost four and five times respectively by October 2021. The soaring price of natural gas has triggered a series of ripple effects in alternative energy markets such as coal and oil, as well as in electricity markets. In the context of economic globalization, the energy problem continues to ferment, and the shortage of energy supply is spreading around the world.

In late 2020 and early 2021, strong demand caused by cold weather led to a surge in LNG prices in the Asian spot market, before temperatures recovered and gas prices fell to normal levels. The story in Europe was similar to Asia, where gas prices retreated after rising for two months in a row. In mid-February 2021, the United States experienced the most extreme cold weather in many years, causing natural gas prices to rise sharply.

Entering March, natural gas prices in major markets around the world were mainly stable, with a small range of shocks. Subsequently, driven by many factors such as market supply and demand mismatch, natural gas prices continue to rise, and in the third quarter, the first European natural gas prices led the world, and then the rise extended to the spot market in Asia and other places, natural gas jumped to become the largest increase in energy commodities this year. On October 27, the Henry Hub natural gas main contract in the United States reached $6.2 / million British thermal units, up 87.3% year on year. At the end of October, the main contract price of the Dutch TTF, which represents the European benchmark, closed at 74.3 euros per megawatt-hour (about $25.43 / mmBTU), and the December spot LNG CIF price in Asia reached $26.534 / mmBTU, both at historic highs. Using March 2021 as the base period, the average monthly price of natural gas in Europe and Asia has increased by nearly four and five times respectively by October 2021, and the average monthly price of natural gas in the United States has also doubled. In contrast, the price of pipeline gas supplies has been less volatile, but has also risen by more than 50%.

Considering the imbalance between supply and demand, energy transition and other factors, coupled with the "La Nina" phenomenon again this winter, global natural gas prices will not fall significantly in the short term. Industry consultancy Wood Mackenzie pointed out that there will not be any weakness in LNG prices going into winter, and demand side management and eventual power rationing may be the last resort.

The soaring price of natural gas has triggered a series of chain reactions in alternative energy markets such as coal and oil, and as the price of various fossil fuels has risen, the price of electricity in many countries has risen to a record high. In the context of economic globalization, the energy problem continues to ferment, and the shortage of energy supply is spreading around the world. In a globalised world, energy supply problems are likely to be widespread and long-lasting, especially in the context of disruptions to supply chains and cuts in fossil fuel investment in response to climate change.

(3) Increased competition in natural gas trade

Since the beginning of this year, the more prominent feature of global LNG trade is that regional competition is more intense and mutual influence is deepening. Traditional LNG suppliers such as Australia and Qatar are increasingly competing with emerging LNG exporters such as the United States and Russia on the supply side. Major Asian consumers and emerging importers with faster growth in gas demand are also competing with European countries on the demand side.