Gas to pass coal in 15 years, equal oil by 2035: IEA

LONDON Mon Jun 6, 2011 7:51pm IST

LONDON (Reuters) - Vast unconventional gas resources across the globe will push world gas demand past coal between 2025 and 2030 and to come close to oil by 2035, the International Energy Agency (IEA) said on Monday.

"The IEA expects global gas demand to overtake coal before 2030, and come close to oil around 2035," the IEA's chief economist Fatih Birol said during the presentation of its new gas outlook in London on Monday.

The IEA said that it expects global gas demand to grow by an average of two percent a year, compared with a 1.2 percent growth in annual total energy demand.

Birol said that this increase will end the current gas glut by 2015, by when demand would begin to outstrip supply.

Under the new scenario, the IEA expects Europe's import price for natural gas to rise from $7.4 per million British Thermal Units (MBtu) to $9.0 in 2015, and then to $9.5 in 2020 and beyond $10 per MBtu by 2030.

The IEA expects the boom in gas demand to result from a sharp increase in unconventional gas production mainly in China, Australia and North America, and from a decline in global nuclear power generation as a result of the incident at Japan's Fukushima Dai-ichi plant earlier this year.

According to the energy agency, the impact of Fukushima will significantly curb the rise in nuclear power generation, with gas stepping in to fill the gap.

"It is still premature to assess in detail the full implications of the Fukushima accident, but it is already clear that it will result in early retirements and delayed or canceled investments in new reactors," said Nobuo Tanaka, the IEA's executive director.

The report said around 40 percent of the increase in global gas production between now and 2035 will come from unconventional gas exploration, such as fracking shale gas or exploiting coalbed methane gas, also known as coal seam gas.

CHINA, US TO DRIVE PRODUCTION RISE

According to the IEA, key drivers of gas growth will be China's 12th five-year plan, which envisages a steep increase in gas generation, as well as rising demand from gas-powered transport vehicles, especially in the United States and India.

Birol said that China's gas growth is motivated by local environmental concerns.

"Worldwide, 16 out of the 20 most polluted cities are in China, largely related from coal power plant pollutions, and for this reason, China is pushing for gas to replace a lot of coal power production," he said.

In the U.S., Birol said that "60 percent of coal power plants will retire in the next 20 years due to old age, and there is a strong chance that a large proportion will be replaced by gas."

Birol said that "China currently consumes about as much gas as Germany, but in 2035 it will be more than the OECD total."

He added that "if our gas scenario takes place, the rise in global gas use will be around 600 billion cubic meters, the equivalent of one Russia (in current gas output)," Birol said.

The IEA report said that non-OECD countries will account for 80 percent of global demand growth, and that by 2035 China will use over 600 billion cm of gas, more gas than the European Union.

India is expected to use over 200 billion cm of gas by 2035.

The IEA said it expects Australia to become one of the world's top exporters of liquefied natural gas (LNG) by 2020, catching up with current leader Qatar.

According to the agency, the increase in unconventional gas exploration is good news in terms of securing global energy supply, as production will be widely distributed across North and South America, China, Australia, Europe, the Middle East, and Africa.

Birol said that "global gas resources exceed 250 years of current production."

CLIMATE TARGETS DIFFICULT TO MEET

But the IEA said that while gas will increasingly replace highly pollutive coal and oil power generation, its steep rise will also come at the cost of low-carbon technologies such as nuclear, and even renewable power generation.

Chief IEA economist Birol said "this will not make it easier for the world to achieve its target of preventing average global temperatures from rising by more than two degrees Celsius.

Instead, Birol said that the IEA's gas scenario could lead to a 3.5 degrees temperature increase, a rise he said " we (the IEA) find unacceptable."

The revised figure of global CO2 equivalent emissions in 2035 as a result of the increased gas demand is a mere 0.5 percent reduction, or 160 million tonnes, compared with the IEA's estimates last year, the agency said.

In order for the world to meet its stated climate target, Birol said "we will need more energy efficiency, more renewable and nuclear power and, if possible, carbon capture and storage technology."

(Editing by Jason Neely)

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