Crude Oil ( ) Brent Crude ( ) Natural Gas ( ) S&P 500 ( ) PHLX Oil ( )

Weaker than expected demand in Asia prompts agency to lower future growth expectations

The International Energy Agency (IEA) revised down its expectations for natural gas global demand growth to 2% from 2.3% a year ago in it its latest Medium-Term Gas Market Report. One of the main drivers behind the revision was lower than expected gas demand in Asia, said the report.

“One of the key – and largely unexpected – developments of 2014 was weak Asian demand,” said IEA Executive Director Maria van der Hoeven. “The experience of the past two years has opened the gas industry’s eyes to a harsh reality: in a world of very cheap coal and falling costs for renewables, it is difficult for gas to compete.”

Since gas prices to Asian markets are indexed to oil prices, the IEA expects that demand will pick up as gas prices remain low. This may not be enough to maintain a competitive edge against other fuel sources. The report found that low prices will benefit gas in the short-term, but the long-term outlook is uncertain, with many Asian countries increasing coal use. “For the fuel to make sustained inroads in the energy mix, confidence in its long-term competitiveness must increase,” the IEA said.

In Industrial Information Research’s (IIR) 2015 Global Power Industry Outlook, IIR said that there is currently $1.36 trillion in active spending in energy projects in East Asia, 86% ($1.17 trillion) of which is focused in China. According to the IIR data, much of that money is going towards new coal development, with some renewable energy buildout as well.

LNG expected to grow 40% in the next five years

Natural gas

Source: Gazprom

While the lion’s share of spending in East Asia is in China, some of the remaining spending is helping Japan to focus on repowering old oil-fired power plants with natural gas, according to IIR. Liquefied natural gas (LNG) is expected to be a major source of power for Japan moving forward.

The IEA projects global LNG export capacity to increase by more than 40% by 2020, with 90% of the additions coming from Australia and the United States. The report says that projects already underway will see little impact from low oil prices, but that projects being considered but not already being developed will be easy targets for companies looking to cut costs.


Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable. This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note. This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results. EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services. In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies. As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note. EnerCom, or its principals or employees, may have an economic interest in any of the companies covered in this report or on Oil & Gas 360®. As a result, readers of EnerCom’s reports or Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.