Growth in Global Natural Gas Consumption Slowed Last Year


According to a new report by Cedigaz, the France-based international natural gas association, cited in the Oil & Gas Journal, global marketed natural gas production and "apparent" consumption last year grew at a slower pace than the previous year.

The report, published in April, said that global natural gas consumption grew by just 2.2%, to 3,348.7 billion cubic meters, as a "turbulent economic climate, ongoing geopolitical tensions, and security issues in Arab countries" weighed on growth. That rate of growth was 0.6% lower than 2011's 2.8% growth and even lower than the 10-year average of 2.7% annual growth.

The decline in gas consumption growth comes despite a massive surge in North American natural gas supplies, which kept prices depressed for much of the past few years, making the fuel more attractive to utility companies, chemical manufacturers, and other companies with energy-intensive operations.

Not surprisingly, consumption in the U.S. rose 4.4%, while consumption among Organization for Economic Cooperation and Development nations grew 2.1%, with Japan reported a whopping 11% increase.

According to Cedigaz, global gas consumption growth last year would have been even lower were it not for three major factors: soaring demand from Japan due to the impact of the 2010 Fukushima nuclear disaster, strong energy demand from emerging markets, and the U.S. shale gas boom.

Gas production growth
Along with the U.S., countries including Australia, China, Libya, Nigeria, Norway, Saudi Arabia, and Turkmenistan reported the largest gains in natural gas production last year, while the Commonwealth of Independent States, or CIS, region was the only major global producing region that reported a production decline, according to Cedigaz.

Though some CIS member countries are thought to contain sizable natural gas reserves, development of those reserves has faced major challenges, including onerous regulations, political opposition, and the lack of expertise and equipment in shale drilling.

For instance, the giant offshore Kashagan oil field, located in Kazakhstan's zone of the Caspian Sea, has yet to produce a single drop of oil, despite more than $30 billion of investment over the past decade. The project, backed by a consortium of global energy companies including ExxonMobil , Royal Dutch Shell , and Eni, has faced major delays due to harsh weather, challenging supply routes, and clashes with local government officials.

Slowdown in global LNG trade
The Cedigaz report also noted a slowdown in the international natural gas trade, which declined by about 1,015 billion cubic meters, or 0.8%, from 2011 levels, due mainly to a deceleration in the international liquefied natural gas, or LNG, trade.

Global LNG supply fell by 2.2% last year, as many gas-producing countries experienced issues with boosting domestic supplies, in addition to the conundrum of whether to export their gas supplies or keep them for domestic consumption.

In the U.S., for instance, a contentious debate about the future of LNG exports continues to rage. Thus far, only Cheniere Energy has managed to secure a permit to export LNG to countries that don't have a free trade agreement with the U.S.

But with the Obama administration signaling its support for U.S. LNG exports, it's starting to look more likely that further export projects will be green-lighted over the next few years, which could lead to higher natural gas prices in the U.S. As the nation's second-largest gas producer, Chesapeake Energy would be one of the biggest beneficiaries of higher prices. While debt-related challenges continue to cast a dark cloud of uncertainty over the company's future, few would question the superb quality of Chesapeake's remaining oil and gas assets. For many investors, the important question is whether Chesapeake's current share price reflects the true value of its assets. To answer that question and to learn more about Chesapeake and its enormous potential, you're invited to check out The Motley Fool's brand-new premium report on the company. Simply click here now to access your copy, and as an added bonus, you'll receive a full year of key updates and expert guidance as news continues to develop.

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