Fundamental changes

The latest edition of the GECF’s Global Gas Outlook has been released against the backdrop of three years of serious and deep crises in the economic, energy, trade, and health, environmental and geopolitical sectors across the globe. Over the same period, the global energy system has experienced ups and downs due to the COVID-19 pandemic, economic recession, underinvestment and geopolitical tensions. These developments have brought about fundamental changes in investment, trade, market performance and agreement arrangements. In the face of big uncertainties and profound changes under the present circumstances, response to the energy enigma is extremely vital and decisive: How can one arrange for an energy system in the world to meet environmental objectives besides helping economic and social development?

In its outlook and with a view to elucidating the pivotal role of gas in the future of the world energy system, the GECF Secretariat has designed the two scenarios of “energy stability” and “accelerated energy decarbonization”, which would significantly contribute to the understanding of the significance of natural gas for both developed and developing nations in the long-term horizon.

Shift in economic power balance

The GECF’s macro-scale paradigm, known as the global gas model serving as the tool for supporting analysis and make forecasts in drawing up the global gas outlook for the Forum, has been prepared based on demographic and economic growth forecasts by the United Nations and the International Monetary Fund (IMF). Furthermore, the GECF’s modelling experts have forecast oil, gas and carbon prices in the long-term.

The UN estimates the world population to reach 9.7 billion in 2050 from 7.9 billion recorded in 2021 with 90% of this demographic growth contributed by Asia-Pacific and Africa. A decline in population growth all across the globe, the ageing of population particularly in developed nations, urbanization growth and increased migration are said to be the most significant demographic developments of humanity in the long-term future.

While the world’s Gross Domestic Product (GDP) is estimated to jump to $210 trillion from $95 trillion over three decades, the economic power balance is expected to shift in favor of developing nations. IMF estimates show that GDP growth in non-OECD nations will exceed that of the OECD nations by 2043, with the former seeing their share of global economic cake jump to 53% in 2050 from 39% in 2021. Furthermore, China, the US, India and the EU would make up for two-thirds of global GDP by 2050.

Energy demand to grow 22%

The GECF’s independent estimates indicate that in light of the upstream capital expenditure’s increase due to inflation and the jump in the rate of return of domestic investment in upstream oil due to uncertainty about the future of oil demand, oil prices are expected to stay high for three decades. Therefore, the average Brent crude oil prices are assumed at $75 during the estimation period. Moreover, natural gas prices, particularly in Asian and European markets, are forecast to be more fluctuating in the 2050 horizon.

Based on the assumptions associated with demographic changes, economic growth as well as oil, gas and carbon prices, energy demand is expected to grow about 22% between 2021 and 2050 to reach 15,867 million tonnes of oil equivalent. Growing need for clean energies is set to boost the share of natural gas and renewables in the world energy mix and further diversify it. The natural gas share of global energy mix is expected to reach 26% in 2050 from 23% in 2021.

36% growth in natural gas consumption

Projections also indicate that the share of natural gas in the energy mix in 2025 will go beyond that of coal and by 2043, natural gas will have become the most important fossil fuel in the world energy mix. According to global gas estimates, gas consumption is expected to reach 5,460 bcm by 2050, up 36% from 2021. Air pollution policies and supplanting natural gas for coal in power plants would be the main propelling factors in increased gas consumption over coming decades.

In coming years, natural gas will be used mainly in electricity generation and 43% of the increase in global gas demand in the 2050 horizon would be related to power generation. Of course, new resources like blue hydrogen and transportation sector are emerging for natural gas demand. It is noteworthy that Asia-Pacific, Middle East and Africa account for the bulk of gas consumption in the world. Europe would remain the sole continent to experience a downward trend.

27% share of undiscovered gas

Natural gas production is also set to experience an upward trend in reaction to the growth in demand. Natural gas production is expected to increase from 4,025 bcm in 2021 to 5,460 bcm in 2050, i.e. a significant 36% growth for this key source of energy in the future. About one-third of the natural gas production growth is estimated to materialize in the Middle East for the horizon in question, only to be followed by Africa and North America, respectively.

The GECF expects 74% of world natural gas production to be supplied by new projects in the future by 2050. Therefore, investment in the gas industry, particularly in the upstream sector, and expanding the supply chain is highly significant. However, one should not neglect the significance of discovery of new natural gas reserves to supply future demand. The results achieved from the gas global model indicate that 27% of the natural gas production should come from untapped gas reserves.

LNG trade doubles

Along with increased natural gas production and consumption, gas trading is also poised to prosper. By 2050, gas trading is expected to exceed 1,700 bcm, or 36% growth. This volume of natural gas trading is equal to one-third of total gas demand. Based on the current estimates, natural gas trading in the LNG form will accelerate in coming years to outstrip PNG trading by 2025. The model’s outputs show that LNG trading would double during the 2021-2050 period.

In the long-term, the most important destination for LNG exports will be Asia-Pacific. This region’s share of LNG trade is expected to fall from 72% to 67% although its absolute volume would increase.

The EU is also trying to prioritize LNG in its new strategy for gas supply to the region. For this purpose, in addition to increasing natural gas imports in the LNG form, it will build liquefaction capacity and debottleneck gas infrastructure. LNG is forecast to see its share jump from 24% in 2021 to 46% in 2030 in the EU’s natural gas imports.

Falling investment in LNG

Increased LNG demand in Asia-Pacific and Europe will make gas trading prosper in all regions by 2030, and intensified energy crisis over the coming decade will force the leading gas importers to boost investment in the new LNG infrastructure in order to guarantee energy security. But from 2030 to 2040, investment in the LNG industry will drop significantly. According to official data, the liquefaction capacity has increased from 270 million tonnes a year to 462 million tonnes a year over the past ten years, which is set to reach 1,026 million tonnes a year by 2050, the bulk of which to be in Asia-Pacific.

The GECF estimates that meeting world gas demand would require $10.5 trillion investment in the upstream gas industry. Gas-rich Africa needs an investment of $1.7 trillion in the upstream gas sector to be able to bring its output to 585 bcm in the 2050 horizon. In order to realize its expected 1,190 bcm output in the same horizon, the Middle East would need to invest $11.1 trillion Furthermore, investment in the mid-stream gas industry for the 2021-2050 period is estimated at $775 billion, driven mainly by LNG demand particularly in Asia-Pacific and Europe.

Africa role

The GECF Global Gas Outlook has developed two different scenarios to shed further light on the significant and pivotal role of natural gas in the sustainable development of developing nations and its role in energy transition and decarbonization in the global energy system.

In the first scenario, entitled “Energy Sustainability”, Africa and the role of natural gas in its sustainable development are focused upon over the three coming decades. Africa is rich in natural and human resources, which enable it to potentially serve inclusive growth and eradicate poverty. According to official data, more than 600 million Africans have no access to electricity, while 900 million others are deprived of clean fuel for cooking. The energy sustainability scenario seeks to fill the gap between the energy economics, energy security and the environment in Africa by offering a natural gas-based solution.

In this scenario, Africa is assumed to be growing at a big pace over 30 years to bring its per capita production to $5,000 by 2050 with a GDP of $12.4 trillion. Therefore, Africa’s energy demand is expected to grow 154% over 30 years to reach 2,180 million tonnes of oil equivalent. Based on the results achieved from the modelling of this scenario, natural gas along with renewable energies will be the main source of fuel for industries and infrastructure resistant to climate changes in this continent. In addition to upgrading energy security, it will help cap greenhouse gas emissions in Africa. Furthermore, more access to electricity for cooking will be one of the main propelling factors of sustainable development and poverty eradication in Sub-Saharan Africa. Increased demand for electricity is likely to enhance natural gas consumption in this gas-rich continent and bring prosperity to the African gas industry.    

Decarbonization scenario

The decarbonization scenario focuses on a large number of tools used for this purpose in the energy system. As the cleanest hydrocarbon fuel, natural gas may play a significant role in the energy system in the 2050 horizon, particularly through developing carbon capture technologies. In the decarbonization scenario, various methods of decarbonization have been assessed in terms of level of penetration and pace of implementation.

The carbon capture and storage technology is one of the most significant tools of energy decarbonization in the future. Given carbon capture technologies in pre- and post-combustion methods, about 8.7 gigatonnes of carbon dioxide is expected to be absorbed. In this scenario, fossil fuels will see their share decline in the energy mix, dropping from 80% in 2021 to 49% in 2050, the bulk of which related to coal.

Replacing coal with natural gas in power plants and structural changes in the energy sector and industries constitute the main factors in the smaller share for coal in this scenario. Oil will also see its share significantly all in this scenario. Over 30 years, due to fuel efficiency in the transportation sector and penetration of electrified cars and fuel pipes, the oil’s share will fall 38% to stand at 17% in the 2050 energy mix.

In this scenario, natural gas will remain the main fossil fuel, whose share would go up to 25% by 2050. An increased scale in decarbonization projects through carbon capture and storage and blue hydrogen technologies will be the main stimulants in increased demand for this fossil fuel in the future although the absolute volume of natural gas demand will be 730 bcm below the reference scenario.

Varieties of energy and technologies

According to findings and results from the global energy model, it could be argued that the key message of the GECF’s outlook is the necessity of application of various sources of energy and technologies to meet global demand in parallel with achieving the objectives of improving the quality of air and capping greenhouse gas emissions. There is no universal model in this regard and optimal routes of energy will be determined based on local and national conditions, as well as such priorities as geography, natural resources, population, technological and financial capabilities and the choice of general public.

Another vision born out of this report is the pivotal role of natural gas alongside renewable energies in transition to clean energy system in the future.

Natural gas puts an end to consumption of wood and animal droppings for cooking to control local contamination and reduce deforestation. Furthermore, it will improve the quality of air and limit greenhouse gas emissions. Therefore, it may be said that natural gas would serve as complementary and supporting source of energy for renewables, which would guarantee the stability of electricity networks and ensure uninterrupted power supply. Natural gas will also be a key component of petrochemicals and chemical fertilizers in the future.

The results achieved from the decarbonization scenario are indicative of the necessity of increasing the scale of clean energy resources and associated technologies, particularly wind and solar energy, supplanting natural gas for coal in power plants, carbon capture and storage technology, green and blue hydrogen and biofuel.

As it was mentioned, these clean sources of energy and technology have capacity to reduce carbon dioxide by 50% by 2050. Natural gas plays a decisive role in reducing carbon dioxide emissions by steel, glass and cement industries through blue hydrogen. Achieving these realistic environmental objectives require policymaking support by governments within the framework of monetary and financial incentives and designing efficient markets.

Iran Petroleum