China is on track to surpass Japan as the world’s largest natural gas importer by 2019, according to a report by the International Energy Agency (IEA).
In its Gas 2018 market outlook, IEA projects China to be importing 171 billion cubic meters of natural gas by 2023, mostly through LNG imports.
China is pushing the global increase of natural gas consumption forward with 37 percent share in the rise from 2017 to 2023.
Overall, global natural gas demand rose by 3 percent, while Chinese natural gas demand jumped 15 percent in 2017, as the country focused on switching from coal to natural gas.
IEA further notes in its report that the industrial sector will take over the role from power generation as the main driver of global demand growth for natural gas.
Over the last decade, power generation was the main contributor to the growth in natural gas consumption, and the demand for natural gas for power generation will continue growing in the North American and Middle East market.
However, the industrial sector is projected to account for 40 percent of the increase in natural gas production during the period under review, surpassing power generation.
LNG market to tighten post-2023
During the period under review, the LNG liquefaction projects will add about 140 bcm of capacity, growing the total global capacity by 30 percent.
The major contributor to the capacity expansion will be the United States with 80 bcm, followed by Australia and Russia with 30 bcm and 15 bcm, respectively.
As a result, IEA expects the LNG trade to grow, however, it will come at a cost of the traditional features of supply contracts.
With flexible destination clauses and gas-indexed pricing, the new models will challenge the traditional fixed-delivery, oil-indexed supply deals.
The additional capacity should all be in operation by 2020, IEA notes, adding that this could lead to a surplus in the short-term, as new import capacity is being built.
The agency adds that new investment is needed in the next few years in order to ensure adequate supply beyond 2023.