Australia is poised to overtake Norway to become the third largest gas producer among OECD nations by 2035, driven mainly by the booming liquefied natural gas (LNG) sector.
Australian gas production is expected to more than triple over the next 25 years, according to the 2010 World Energy Outlook from the International Energy Agency.
Australian gas production is forecast to grow at an average rate of 4.2% a year until 2035, making it one of the fastest growing sectors in the world.
That is in fact double the rate of growth in the huge and rapidly growing demand for energy from China over the next 25 years, according to the IEA report
But the boom in coal will slow and Australian coal production will only rise by around 0.6% a year over the next 25 years, and our oil output will fall.
Driving that demand will be China, according to the outlook, with help from India, especially after 2020.
But returns will be slow in coming as the IEA says the oversupply of gas around the world (caused mostly by the US unconventional gas boom) will peak in 2011 instead of 2015, but last for another nine years.
The Outlook forecasts Australian gas production ranking third among Organisation for Economic Co-operation and Development countries towards the end of the projection period in 2035.
By this stage, Australia’s gas output will only be surpassed by the US and Canada, according to the report and Australia’s gas output is expected to eclipse Malaysia’s by 2020 and Indonesia’s by 2025. The two nations are currently the biggest gas producers in the Asia Pacific region and are major LNG exporters.
LNG from coal seam gas in Queensland and the vast offshore projects in Western Australia, such as Gorgon, Wheatstone and others, will be the drivers.
Gorgon has a capacity of around 15 to 16 million tonnes a year of LNG, Wheatstone around 25 million, while estimates of Queensland LNG production range from 10 to 15 million tonnes a year.
As well there are unconfirmed but possible unconventional gas reserves around the Cooper Basin in central Australia and parts of Western Australia (as well as coal seam gas possibilities in NSW).
Australia’s rise up the supply chain will see LNG join coal, uranium, iron ore and other commodities among our most important and strategic exports in coming years.
The IEA said global gas demand will rise 44% by 2035, with China accounting for more than a fifth of that increase.
In fact China will be the biggest influence on world energy markets (it already is among the top three, with the US and Europe).
China is seen as the source of the biggest increase in demand in absolute terms.
Chinese demand is projected to rise from just over 8 million barrels of oil a day last year to more than 15 million by 2035.
"China accounts for 57 per cent of the global increase in demand," the IEA said.
"Demand could grow even more if the rising international prices of oil assumed in this scenario were offset by an appreciation of the Yang against the dollar".
The increase in China will see primary demand surging by 75% in 2008-2035, a far bigger increase than in any other country or region.
China is forecast to account for 36% of the global increase in primary energy use between 2008 and 2035, with its share of total demand jumping from 17% to 22%.
India is the second-largest contributor to the increase in global demand to 2035, accounting for 18% of the rise.
India’s energy consumption will more than double by 2035, growing on average by 3.1% per year, a rate of growth significantly higher than in any other region, even China’s.
According to the IEA, China’s primary energy demand is projected to climb by 2.1% per year between 2008 and 2035, reaching two-thirds of the level of consumption of the entire OECD.
China’s total final energy consumption will increase at a similar rate, expanding by 2% per year between 2008 and 2035.
“China could lead us into a golden age for gas,” the IEA said.
The IEA said unconventional gas accounts for 35% of the increase in global supply to 2035, with new non-US producers emerging.
"The gas glut will peak soon, but may dissipate only very slowly. The glut will keep pressure on gas exporters to move away from oil-price indexation, notably in Europe," The IEA said.
That could see gas prices fall, generating higher demand.
"Lower prices could lead to stronger demand for gas, backing out renewables & coal in power generation," The IEA forecast.
But the global oversupply of gas will rise above 200 billion cubic metres (bcm) next year and capacity is likely to exceed demand for another 10 years, despite rising gas consumption.
"The gas glut will be with us 10 more years," IEA chief economist Fatih Birol said this week.
All IEA scenarios forecast gas demand will increase, but it said that demand would take until 2020 to absorb swelling global gas supplies, which are due largely to a surge in North American shale gas and liquefied natural gas production (LNG).
"The glut of global gas supply capacity that has emerged as a result of the economic crisis … the boom in U.S. unconventional gas production and a surge in liquefied natural gas capacity could persist for longer than many expect," the IEA said.
A year ago the IEA said it expected the global gas glut to hit 200 bcm
