World Natural Gas 2018-2050: World Energy Annual Report (Part 3)

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Includes: BOIL, DCNG, DGAZ, GAZB, KOLD, UGAZ, UNG, UNL
by: Ron Patterson

By Dr. Minqi Li, Professor

Department of Economics, University of Utah

This is Part 3 of the World Energy Annual Report in 2018. This part of the Annual Report provides updated analysis of world natural gas production and consumption, evaluates the future prospect of world natural gas supply and considers the implications of peak natural gas production for global economic growth.

Natural gas is in a relatively early phase of depletion. According to the German Federal Institute for Geosciences and Natural Resources, world cumulative natural gas production up to 2016 was 117 trillion cubic meters, world natural gas reserves were 197 trillion cubic meters, and world natural gas resources were 643 trillion cubic meters (BGR 2017, Table A-15). BGR defines "resources" as "proven amounts of energy resources which cannot currently be exploited for technical and/or economic reasons, as well as unproven but geologically possible energy resources which may be exploitable in future" (BGR 2017, Glossary). According to the BP Statistical Review of World Energy, world natural gas reserves at the end of 2017 were 194 trillion cubic meters (166 billion tons of oil equivalent).


World Historical and Projected Natural Gas Production, 1980-2050

This report uses official reserves, official projections, or energy research institution estimates to establish the ultimately recoverable natural gas resources for the world's ten largest natural gas producers. For the rest of the world (the world total less the ten largest natural gas producers), this report uses Hubbert linearization to establish the ultimately recoverable natural gas resources.

Figures are placed at the end of each section.

Natural Gas Consumption by Major Economies, 1990-2017

According to the BP Statistical Review of World Energy, world natural gas consumption was 3,156 million tons of oil equivalent (3,670 billion cubic meters) in 2017. Between 2007 and 2017, world natural gas consumption grew at an average annual rate of 2.2 percent.

Figure 1 compares the historical world economic growth rates and the natural gas consumption growth rates from 1991 to 2017. The natural gas consumption growth rate has an intercept of -0.01 at zero economic growth rate and a slope of 0.992. That is, natural gas consumption has an "autonomous" tendency to fall by about 1 percent a year when the economic growth rate is zero. When the economic growth rate rises above zero, an increase in economic growth rate by one percentage point is associated with an increase in natural gas consumption by 0.99 percent. R-square for the linear trend is 0.49. In 2017, world natural gas consumption grew by 2.7 percent - a rate that is 0.1 percentage points below what is implied by the historical trend.

Figure 2 compares the per capita natural gas consumption in relation to per capita GDP for the world's six largest national natural gas consumers and the European Union.

The United States is the world's largest natural gas consumer. In 2017, its natural gas consumption was 636 million tons of oil equivalent (740 billion cubic meters), accounting for 20 percent of the world natural gas consumption. The US per capita natural gas consumption declined from 1.94 tons of oil equivalent in 1996 to 1.69 tons of oil equivalent in 2006. Its natural gas consumption has tended to grow since then. Per capita natural gas consumption was about 2 tons of oil equivalent in 2016 and 1.95 tons of oil equivalent in 2017.

The European Union is the world's second-largest natural gas consumer. In 2017, its natural gas consumption was 401 million tons of oil equivalent (467 billion cubic meters), accounting for 13 percent of the world natural gas consumption. The EU per capita natural gas consumption peaked at 898 kilograms of oil equivalent in 2005 and declined to 678 kilograms of oil equivalent by 2014. In 2017, its per capita natural gas consumption recovered to 782 kilograms of oil equivalent.

The Russian Federation is the world's third-largest natural gas consumer. In 2017, its natural gas consumption was 365 million tons of oil equivalent (425 billion cubic meters), accounting for 12 percent of the world natural gas consumption. Russia's per capita natural gas consumption grew from about 2 tons of oil equivalent in 1997 to 2.62 tons of oil equivalent in 2011. In 2017, the per capita natural gas consumption was 2.53 tons of oil equivalent.

China is the world's fourth-largest natural gas consumer. In 2017, its natural gas consumption reached 207 million tons of oil equivalent (240 billion cubic meters), accounting for 6.6 percent of the world natural gas consumption. From 1990 to 2017, the country's per capita natural gas consumption surged from 12 kilograms of oil equivalent to 149 kilograms of oil equivalent, which is still substantially below the per capita natural gas consumption levels of advanced capitalist economies.

If China's per capita natural gas consumption continues to follow its historical trend in relation to per capita GDP, its per capita natural gas consumption will rise to 532 kilograms of oil equivalent by 2050 (when China's per capita GDP is projected to rise to about $50,000). The country's population is expected to peak before 2030 and decline to 1.36 billion by 2050. Given these projections, China's natural gas demand will rise to 722 million tons of oil equivalent by 2050.

Iran is the world's fifth-largest natural gas consumer. In 2017, its natural gas consumption reached 184 million tons of oil equivalent (214 billion cubic meters), accounting for 5.8 percent of the world natural gas consumption. From 1990 to 2017, the country's per capita natural gas consumption skyrocketed from 364 kilograms of oil equivalent to 2.27 tons of oil equivalent.

Japan is the world's sixth-largest natural gas consumer. In 2017, its natural gas consumption was 101 million tons of oil equivalent (117 billion cubic meters), accounting for 3.2 percent of the world natural gas consumption. The country's per capita natural gas consumption peaked at 825 kilograms of oil equivalent in 2013. In 2017, Japan's per capita natural gas consumption was 794 kilograms of oil equivalent.

Canada is the world's seventh-largest natural gas consumer. In 2017, its natural gas consumption was 100 million tons of oil equivalent (116 billion cubic meters), accounting for 3.2 percent of the world natural gas consumption. The country's per capita natural gas consumption increased from 1.97 tons of oil equivalent in 1990 to 2.49 tons of oil equivalent in 2000. Per capita consumption decreased to 2.21 tons of oil equivalent in 2009 and rose to the all-time high of 2.71 tons of oil equivalent in 2017.

Figure 1: World Natural Gas Consumption and Economic Growth, 1991-2017

Linear Trend: Natural Gas Consumption Growth Rate = -0.010 + 0.992 * Economic Growth Rate (R-square = 0.490)

Sources: World natural gas consumption from 1990 to 2017 is from BP (2018). Gross world product in constant 2011 international dollars from 1990 to 2016 is from World Bank (2018), extended to 2017 using growth rate reported by IMF (2018, Statistical Appendix, Table A1).

Figure 2: Per Capita GDP and Natural Gas Consumption, Major Economies, 1990-2017

Sources: Per capita natural gas consumption and per capita GDP are calculated using data for natural gas consumption, GDP, and population. National and regional natural gas consumption from 1990 to 2017 is from BP plc (2018). National and regional GDP from 1990 to 2016 is from World Bank (2018), extended to 2017 using growth rates reported by IMF (2018, Statistical Appendix, Table A1, A2, and A4). National and regional population from 1990 to 2016 is from World Bank (2018), extended to 2017 by assuming that the 2017 population growth rates are the same as the 2016 growth rates. To project China's per capita natural gas consumption, a log-linear relationship is estimated between the per capita natural gas consumption and per capita GDP for the period 1990-2017. China's GDP and population projections from 2018 to 2050 are from EIA (2017, Reference Case, Table A3 and Table J4), adjusted to make the projected GDP and population levels in 2017 matching the levels reported by World Bank (2018).

The United States

The United States is currently the world's largest natural gas producer. In 2017, the US produced 632 million tons of oil equivalent of natural gas (735 billion cubic meters), accounting for 20 percent of the world natural gas production.

The US conventional natural gas production peaked in 1971, when total natural gas production was 505 million tons of oil equivalent. Since 2005, US natural gas production has experienced a spectacular expansion because of the shale gas boom. The US Energy Information Administration projects that US natural gas production will rise to about 1 billion tons of oil equivalent by 2050 (EIA 2018, Reference Case, Table A1).

The US cumulative natural gas production up to 2017 was 31.2 billion tons of oil equivalent (cumulative production up to 2007 is from BGR 2009, Table A 4-2, extended to 2017 using annual production data from BP 2018; 1 trillion cubic meters of natural gas = 0.86 billion tons of oil equivalent). Applying Hubbert linearization to the annual production to cumulative production ratios implied by the projected US natural gas production from 2041 to 2050, the US's ultimately recoverable natural gas resources are estimated to be 147.2 billion tons of oil equivalent and the remaining recoverable natural gas resources are estimated to be 116 billion tons of oil equivalent. By comparison, the US "proved" natural gas reserves at the end of 2017 were reported to be 8.7 trillion cubic meters (7.5 billion tons of oil equivalent) (BP 2018).

Figure 3 shows the historical US natural gas production and the future production projected by EIA.

Figure 3: US Natural Gas Production, 1980-2050

Sources: The US historical natural gas production from 1980 to 2017 is from BP (2018). Projected US natural gas production from 2018 to 2050 is from EIA (2018, Reference Case, Table A1), adjusted to make the projected natural gas production level in 2017 match the production level reported by BP (2018).

Russian Federation

The Russian Federation is the world's second-largest natural gas producer. In 2017, it produced 547 million tons of oil equivalent of natural gas (636 billion cubic meters), accounting for 17 percent of the world natural gas production.

This report assumes that Russia's ultimately recoverable natural gas resources are the sum of historical cumulative production and the official reserves. Russia's cumulative natural gas production up to 2017 was 20.1 billion tons of oil equivalent (cumulative production up to 2007 is from BGR 2009, Table A 4-2, extended to 2017 using annual production data from BP 2018; 1 trillion cubic meters of natural gas = 0.86 billion tons of oil equivalent). Its official natural gas reserves at the end of 2017 were reported to be 35 trillion cubic meters (30.1 billion tons of oil equivalent) (BP 2018). The ultimately recoverable natural gas resources are estimated to be 50.2 billion tons of oil equivalent.

Based on the above assumptions, Russia's natural gas production is projected to peak in 2026 at 572 million tons of oil equivalent. Figure 4 shows its historical and projected natural gas production.

Figure 4: Russian Federation's Natural Gas Production, 1980-2050

Sources: Russia's historical natural gas production from 1985 to 2017 is from BP (2018). For 1980 to 1984, its natural gas production is assumed to be 71.3 percent of the Soviet Union's total natural gas production. To project Russia's natural gas production, I used a logistic curve, assuming the ultimately recoverable resources are the sum of cumulative production and official reserves. The parameters are calculated so that the projected annual production equals the actual annual production in 2017.

Iran

Iran is the world's third-largest natural gas producer. In 2017, it produced 193 million tons of oil equivalent of natural gas (224 billion cubic meters), accounting for 6.1 percent of the world natural gas production.

This report assumes that Iran's ultimately recoverable natural gas resources are the sum of historical cumulative production and the official reserves. Its cumulative natural gas production up to 2017 was 2.6 billion tons of oil equivalent (cumulative production up to 2007 is from BGR 2009, Table A 4-2, extended to 2017 using annual production data from BP 2018; 1 trillion cubic meters of natural gas = 0.86 billion tons of oil equivalent). The country's official natural gas reserves at the end of 2017 were reported to be 33.2 trillion cubic meters (28.6 billion tons of oil equivalent) (BP 2018). The ultimately recoverable natural gas resources are estimated to be 31.2 billion tons of oil equivalent.

Based on the above assumptions, Iran's natural gas production is projected to peak in 2046 at 645 million tons of oil equivalent. Figure 5 shows the country's historical and projected natural gas production.

Figure 5: Iran's Natural Gas Production, 1980-2050

Sources: Iran's historical natural gas production from 1980 to 2017 is from BP (2018). To project the country's natural gas production, I used a logistic curve assuming the ultimately recoverable resources are the sum of cumulative production and official reserves. The parameters are calculated so that the projected annual production equals the actual annual production in 2017.

Canada

Canada is the world's fourth-largest natural gas producer. In 2017, it produced 152 million tons of oil equivalent of natural gas (176 billion cubic meters), accounting for 4.8 percent of the world natural gas production.

Canada's conventional natural gas production peaked in 2002, when total natural gas production was 155 million tons of oil equivalent. Since 2010, the country's natural gas production has resumed growth driven by the shale gas boom. Its cumulative natural gas production up to 2017 was 5.6 billion tons of oil equivalent (cumulative production up to 2007 is from BGR 2009, Table A 4-2, extended to 2017 using annual production data from BP 2018; 1 trillion cubic meters of natural gas = 0.86 billion tons of oil equivalent). Canada's "proved" natural gas reserves at the end of 2017 were reported to be 1.9 trillion cubic meters (1.6 billion tons of oil equivalent) (BP 2018). The "proved" natural gas reserves are evidently too conservative as an estimate of the country's remaining recoverable natural gas resources.

The German Federal Institute for Geosciences and Natural Resources estimates Canada's ultimately recoverable natural gas resources to be 46.4 trillion cubic meters (39.9 billion tons of oil equivalent) (BGR 2017, Table A-15). Using the BGR estimate as the country's ultimately recoverable natural gas resources, Canada's natural gas production is projected to rise to 276 million tons of oil equivalent by 2050. Figure 6 shows its historical and projected natural gas production.

Figure 6: Canada's Natural Gas Production, 1980-2050

Sources: Canada's historical natural gas production from 1980 to 2017 is from BP (2018). To project Canada's natural gas production, I used a logistic curve using the ultimately recoverable resources estimated by BGR (2017). The parameters are calculated so that the projected annual production equals the actual annual production in 2017.

Qatar

Qatar is the world's fifth-largest natural gas producer. In 2017, it produced 151 million tons of oil equivalent of natural gas (176 billion cubic meters), accounting for 4.8 percent of the world natural gas production.

This report assumes that Qatar's ultimately recoverable natural gas resources are the sum of historical cumulative production and the official reserves. The country's cumulative natural gas production up to 2017 was 1.7 billion tons of oil equivalent (cumulative production up to 2007 is from BGR 2009, Table A 4-2, extended to 2017 using annual production data from BP 2018; 1 trillion cubic meters of natural gas = 0.86 billion tons of oil equivalent). Its official natural gas reserves at the end of 2017 were reported to be 24.9 trillion cubic meters (21.4 billion tons of oil equivalent) (BP 2018). The ultimately recoverable natural gas resources are estimated to be 23.1 billion tons of oil equivalent.

Based on the above assumptions, Qatar's natural gas production is projected to peak in 2043 at 573 million tons of oil equivalent. Figure 7 shows the country's historical and projected natural gas production.

Figure 7: Qatar's Natural Gas Production, 1980-2050

Sources: Qatar's historical natural gas production from 1980 to 2017 is from BP (2018). To project its natural gas production, I used a logistic curve assuming the ultimately recoverable resources are the sum of cumulative production and official reserves. The parameters are calculated so that the projected annual production equals the actual annual production in 2017.

China

China is the world's sixth-largest natural gas producer. In 2017, it produced 128 million tons of oil equivalent of natural gas (149 billion cubic meters), accounting for 4.1 percent of the world natural gas production.

This report assumes that China's ultimately recoverable natural gas resources are the sum of historical cumulative production and the official reserves. The country's cumulative natural gas production up to 2017 was 1.7 billion tons of oil equivalent (cumulative production up to 2007 is from BGR 2009, Table A 4-2, extended to 2017 using annual production data from BP 2018; 1 trillion cubic meters of natural gas = 0.86 billion tons of oil equivalent). Its official natural gas reserves at the end of 2017 were reported to be 5.5 trillion cubic meters (4.7 billion tons of oil equivalent) (BP 2018). The ultimately recoverable natural gas resources are estimated to be 6.4 billion tons of oil equivalent.

Figure 8 compares China's historical and projected natural gas production and consumption. The country's natural gas production is projected to peak in 2027 at 170 million tons of oil equivalent. Its natural gas consumption is projected to rise from 207 million tons of oil equivalent in 2017 to 358 million tons in 2030, 538 million tons in 2040, and 722 million tons in 2050. Under the projections, China's net natural gas imports (consumption less production) will rise from 78 million tons of oil equivalent in 2017 to 191 million tons in 2030, 427 million tons in 2040, and 671 million tons in 2050. This will be equivalent to 21 percent of the world natural gas production in 2017.

Figure 8: China's Natural Gas Production and Consumption, 1980-2050

Sources: China's historical natural gas production and consumption from 1980 to 2017 is from BP (2018). Its future per capita natural gas consumption is projected by assuming that per capita natural gas consumption will grow in accordance with the historical relationship between per capita natural gas consumption and per capita GDP (see Figure 2). Future natural gas consumption is then calculated using per capita natural gas consumption multiplied by the projected population. China's population projection from 2018 to 2050 is from EIA (2017, Reference Case, Table J4), adjusted to make the projected population level in 2017 matching the population level used by this report.

Norway

Norway is the world's seventh-largest natural gas producer. In 2017, it produced 106 million tons of oil equivalent of natural gas (123 billion cubic meters), accounting for 3.3 percent of the world natural gas production.

Its cumulative natural gas production up to 2017 was 2 billion tons of oil equivalent (cumulative production up to 2007 is from BGR 2009, Table A 4-2, extended to 2017 using annual production data from BP 2018; 1 trillion cubic meters of natural gas = 0.86 billion tons of oil equivalent). The country's official natural gas reserves at the end of 2017 were reported to be 1.7 trillion cubic meters (1.5 billion tons of oil equivalent) (BP 2018). The official reserves are probably too conservative as an estimate of Norway's remaining recoverable natural gas resources.

The German Federal Institute for Geosciences and Natural Resources estimates Norway's ultimately recoverable natural gas resources to be 6.1 trillion cubic meters (5.2 billion tons of oil equivalent) (BGR 2017, Table A-15). Using the BGR estimate as the country's ultimately recoverable natural gas resources, its natural gas production is projected to peak in 2023 at 113 million tons of oil equivalent. Figure 9 shows Norway's historical and projected natural gas production.

Figure 9: Norway's Natural Gas Production, 1980-2050

Sources: Norway's historical natural gas production from 1980 to 2017 is from BP (2018). To project the country's natural gas production, I used a logistic curve using the ultimately recoverable resources estimated by BGR (2017). The parameters are calculated so that the projected annual production equals the actual annual production in 2017.

Australia

Australia is the world's eighth-largest natural gas producer. In 2017, it produced 98 million tons of oil equivalent of natural gas (114 billion cubic meters), accounting for 3.1 percent of the world natural gas production.

This report assumes that Australia's ultimately recoverable natural gas resources are the sum of historical cumulative production and the official reserves. The country's cumulative natural gas production up to 2017 was 1.2 billion tons of oil equivalent (cumulative production up to 2007 is from BGR 2009, Table A 4-2, extended to 2017 using annual production data from BP 2018; 1 trillion cubic meters of natural gas = 0.86 billion tons of oil equivalent). Its official natural gas reserves at the end of 2017 were reported to be 3.6 trillion cubic meters (3.1 billion tons of oil equivalent) (BP 2018). The ultimately recoverable natural gas resources are estimated to be 4.3 billion tons of oil equivalent.

Based on the above assumptions, the country's natural gas production is projected to peak in 2026 at 124 million tons of oil equivalent. Figure 10 shows Australia's historical and projected natural gas production.

Figure 10: Australia's Natural Gas Production, 1980-2050

Sources: Australia's historical natural gas production from 1980 to 2017 is from BP (2018). To project the country's natural gas production, I used a logistic curve assuming the ultimately recoverable resources are the sum of cumulative production and official reserves. The parameters are calculated so that the projected annual production equals the actual annual production in 2017.

Saudi Arabia

Saudi Arabia is the world's ninth-largest natural gas producer. In 2017, it produced 96 million tons of oil equivalent of natural gas (111 billion cubic meters), accounting for 3 percent of the world natural gas production.

This report assumes that Saudi Arabia's ultimately recoverable natural gas resources are the sum of historical cumulative production and the official reserves. The country's cumulative natural gas production up to 2017 was 1.8 billion tons of oil equivalent (cumulative production up to 2007 is from BGR 2009, Table A 4-2, extended to 2017 using annual production data from BP 2018; 1 trillion cubic meters of natural gas = 0.86 billion tons of oil equivalent). Its official natural gas reserves at the end of 2017 were reported to be 8 trillion cubic meters (6.9 billion tons of oil equivalent) (BP 2018). The ultimately recoverable natural gas resources are estimated to be 8.7 billion tons of oil equivalent.

Based on the above assumptions, Saudi Arabia's natural gas production is projected to peak in 2037 at 149 million tons of oil equivalent. Figure 11 shows the country's historical and projected natural gas production.

Figure 11: Saudi Arabia's Natural Gas Production, 1980-2050

Sources: Saudi Arabia's historical natural gas production from 1980 to 2017 is from BP (2018). To project its natural gas production, I used a logistic curve assuming the ultimately recoverable resources are the sum of cumulative production and official reserves. The parameters are calculated so that the projected annual production equals the actual annual production in 2017.

Algeria

Algeria is the world's tenth-largest natural gas producer. In 2017, it produced 79 million tons of oil equivalent of natural gas (91 billion cubic meters), accounting for 2.5 percent of the world natural gas production.

This report assumes that Algeria's ultimately recoverable natural gas resources are the sum of historical cumulative production and the official reserves. The country's cumulative natural gas production up to 2017 was 2.2 billion tons of oil equivalent (cumulative production up to 2007 is from BGR 2009, Table A 4-2, extended to 2017 using annual production data from BP 2018; 1 trillion cubic meters of natural gas = 0.86 billion tons of oil equivalent). Its official natural gas reserves at the end of 2017 were reported to be 4.3 trillion cubic meters (3.7 billion tons of oil equivalent) (BP 2018). The ultimately recoverable natural gas resources are estimated to be 5.9 billion tons of oil equivalent.

Based on the above assumptions, Algeria's natural gas production is projected to peak in 2027 at 85 million tons of oil equivalent. Figure 12 shows the country's historical and projected natural gas production.

Figure 12: Algeria's Natural Gas Production, 1980-2050

Sources: Algeria's historical natural gas production from 1980 to 2017 is from BP (2018). To project its natural gas production, I used a logistic curve assuming the ultimately recoverable resources are the sum of cumulative production and official reserves. The parameters are calculated so that the projected annual production equals the actual annual production in 2017.

Rest of the World

Rest of the world is defined as the world total excluding the ten largest natural gas producers. In 2017, rest of the world produced 985 million tons of oil equivalent of natural gas, accounting for 31 percent of the world natural gas production. Rest of the world's natural gas production has been on a plateau since 2010. In 2015, rest of the world's natural gas production reached 996 million tons of oil equivalent, the highest level in history.

Figure 13 projects rest of the world's annual production to cumulative production ratios against the historical cumulative natural gas production from 1980 to 2017. Hubbert linearization is applied to the annual production to cumulative production ratios from 2009 to 2017. Regression R-square is 0.963. Where the downward linear trend meets the horizontal axis indicates that rest of the world's ultimately recoverable natural gas resources will be 61.9 billion tons of oil equivalent. Rest of the world's cumulative natural gas production up to 2017 was 33.3 billion tons of oil equivalent. Thus, the rest of the world's remaining recoverable natural gas resources are estimated to be 28.6 billion tons of oil equivalent. The parameters from the Hubbert linear trend are used to project rest of the world's future natural gas production. Figure 14 shows its historical and projected natural gas production.

Figure 15 shows the historical and projected world natural gas production. World cumulative natural gas production up to 2017 was 103 billion tons of oil equivalent. World ultimately recoverable natural gas resources are estimated to be 384 billion tons of oil equivalent. World remaining recoverable natural gas resources are estimated to be 281 billion tons of oil equivalent.

World natural gas production is projected to peak in 2036 at 3,921 million tons of oil equivalent and decline to 3,489 million tons of oil equivalent by 2050.

Figure 13: Rest of the World's Cumulative Natural Gas Production, 1980-2017

Sources: Rest of the world's cumulative natural gas production up to 2007 is from BGR (2009, Table A 4-2). This is used as the reference point. Cumulative production ending in other years is calculated using annual production data reported by BP (2018).

Figure 14: Rest of the World's Natural Gas Production, 1980-2050

Sources: Rest of the world's historical natural gas production from 1980 to 2017 is from BP (2018).

Figure 15: World Historical and Projected Natural Gas Production, 1980-2050

Sources: Historical natural gas production from 1980 to 2017 is from BP (2018).

References