IEA Medium-Term Gas Market Report 20161© OECD/IEA 2016 © OECD/IEA 2016 IEA Medium-Term Gas Market Report 2016

© OECD/IEA 2016 1 © OECD/IEA 2016

IEA Medium-Term Gas Market Report

2016

© OECD/IEA 2016 2

Growth in global gas demand slows

Growth in gas demand slows as it faces greater competition in the power sector; yet it is the only fossil fuel that does not suffer a decline in its share of the energy mix

0

100

200

300

400

500

600

2009-15 2015-21

bcm

Change in world natural gas demand

Change in total gas demand

2.5 % 1.5 %

Change in per cent

© OECD/IEA 2016 3

China drives increase in global gas demand, as the United States takes a back seat

US gas demand growth slows sharply, driven by stagnation in the power sector; EU gas demand gradually recovers on coal & nuclear power plant retirements

-100

-50

0

50

100

150

China Middle East United States India EU Korea andJapan

bcm

Change in natural gas demand by region (bcm)

2009-15 2015-21

© OECD/IEA 2016 4

Growth in gas production is led by the United States and Australia

The United States & Australia rather than the more established exporters – Russia, Qatar & ASEAN – are the main source of production growth

-100

-50

0

50

100

150

200

United States Australia Qatar China Russia ASEAN EU

bcm

Change in natural gas production by region (bcm)

2009-15 2015-21

© OECD/IEA 2016 5

US gas production stagnates in 2016 but a recovery is expected

Change in US gas production, 2011-2021 (bcm)

Low prices have impacted US gas production; but as market balances tighten & prices gradually recover, robust growth is set to resume

-80.00

-60.00

-40.00

-20.00

0.00

20.00

40.00

60.00

80.00

- 80

- 60

- 40

- 20

0

20

40

60

80

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

bcm

LTO associated gas Marcellus+Utica Others Total

© OECD/IEA 2016 6

Greater competition is coming to the European gas market

US LNG is competitive in Europe

Oversupply in global LNG markets will intensify competition; flexible US LNG volumes are well-placed to compete in Europe

Nb: Based on cash costs and on forward curves as of June 7th 2016

0

2

4

6

8

10

12

2013 2015 2017

US

D/M

btu

European hub prices (TTF) Henry Hub indexed LNG delivered to Europe

© OECD/IEA 2016 7

Global LNG export capacity increases sharply

LNG capacity additions will be led by the US & Australia over the next five years; projects in Canada & East Africa could also move ahead if demand & prices recover

0

40

80

120

160

200

2009-15 2015-21

bcm

Liquefaction capacity additions

Australia Qatar U.S. Others

© OECD/IEA 2016 8

As imports from Japan & Korea are set to decline, the rebalancing of global markets will depend on the rate of expansion in China & other developing Asia

Developing Asia emerges as key engine of LNG import growth

-40

0

40

80

120

160

2009-15 2015-21

bcm

Change in LNG imports by region (bcm)

India China Other developing Asia EU Korea + Japan

© OECD/IEA 2016 9

Cross border supply cut

Terrorist attack - sabotage

Natural disaster

Technical disruption

Shortages & infrastructure bottlenecks

Algeria 2013/2016

Egypt/Sinaï 2011-2015

Libya 2011-2013

Nigeria 2014-2016 Yemen 2012-2016

Argentinian - Chile 2004

Russian-Ukrainian conflict 2006/2009/2014

India-Nepal 2015

Katrina & Rita 2005 Japan 2011

Argentina 2004-2015

Polar Vortex 2014-2015

UK 2006/ 2010/2013

Pakistan 2011-2015

Egypt 2014

The amount of LNG capacity that is out of service has almost tripled over the past four years, highlighting security & investment challenges in key producer countries

Gas security: No time for complacency

Angola 2014

© OECD/IEA 2016 10

Investment in new LNG export capacity has ground to a halt

The collapse in investment increases the risk of tighter markets in the next decade; concerns about gas supply security could quickly re-emerge

0

10

20

30

40

50

2011 2012 2013 2014 2015 2016 (to date)

bcm

Final investment decisions in liquefaction capacity by year

© OECD/IEA 2016 11

Conclusions

The gas landscape is changing: production growth is increasingly driven by the US & Australia; demand growth by developing Asia

Traditional exporters will come under pressure as competition from new supply sources intensifies

Global gas prices are set to stay under pressure as a huge amount of LNG export capacity is coming online just as demand slows

Lower prices have triggered a collapse in new investment

IEA is taking on a new mandate on gas security – low prices & well supplied markets give no cause for complacency