Global Natural Gas Consumption Regains Momentum

Driven by surging natural gas consumption in Asia and the United States, global use of the form of fossil fuel rebounded 7.4 percent from its 2009 slump to hit a record 111.9 trillion cubic feet in 2010, according to a new Vital Signs Online report from the Worldwatch Institute. This increase puts natural gas's share of total energy consumption at 23.8 percent, a reflection of new pipelines and natural gas terminals in many countries.

The world's largest incremental increase in natural gas use occurred in the United States, where low prices triggered a 1.3 trillion-cubic-feet increase to 24.1 trillion cubic feet, just over one-fifth of global natural gas consumption. But the Asia Pacific region experienced the strongest growth as a share of 2009 consumption levels, with China, India, South Korea, and Taiwan all experiencing demand growth of over 20 percent. China, which surpassed Japan in 2009 to become Asia's largest natural gas consumer, by and large led the region's growth spurt by consuming 3.9 trillion cubic feet, or 3.4 percent of world usage.

The former Soviet Union, which experienced the largest regional decline in natural gas consumption in 2009, saw its demand bounce back by 6.8 percent in 2010. Russia, the world's second largest natural gas consumer, single-handedly accounted for 70 percent of regional growth. In the European Union, natural gas consumption increased by 7.4 percent; however, the EU's share of global natural gas consumption is on the decline. The Middle East, which is home to some of the richest natural gas resources in the world but lacks the proper infrastructure to facilitate much domestic consumption, saw a 6.2 percent rise in natural gas demand.

Natural gas producers have responded to this revived demand with a 7.3 percent boost in production. The United States maintained its position as the leading source of natural gas, accounting for just under one-fifth of the world's total production in 2010. In Russia, which holds nearly a quarter of the world's proved natural gas reserves, production jumped 11.6 percent. In the Middle East, growth in production of natural gas far outstripped that of consumption, rising by a full 13.2 percent. Last year, Qatar and Iran alone accounted for 29.4 percent of global proved reserves.

Reenergized global gas demand drove average prices up from their 2009 lows in nearly all markets. According to one index, the U.S. saw a 13 percent price increase over 2009 levels. Prices remained the highest in Asia, where consumption increased most rapidly between 2009 and 2010. The European Union, where prices fell 6 percent, proved to be the exception to this trend, thanks to an excess of liquid natural gas originally intended for U.S. markets.

Two major developments this year have significantly affected the stability of global natural gas markets. The political unrest brought about by the "Arab Spring" slowed production in a number of gas-producing countries in North Africa. Additionally, the disaster at Japan's Fukushima Daiichi nuclear plant has led countries around the world to reconsider their dependence on nuclear power. "Natural gas is likely to play a major role in filling the gap left by idled and phased out nuclear plants," write report authors Saya Kitasei and Ayodeji Adebola. "The unanticipated spike in public opposition to nuclear power can only increase global natural gas demand in the coming decade."

Further highlights from the study:

• The share of global natural gas trade represented by liquified natural gas (LNG) surpassed 30 percent in 2010 for the first time on record.
• Russia maintained its status as the world's leading exporter of natural gas, accounting for 27.5 percent of global pipeline trade.
• Gas flaring, or the burning of excess gas, is on the decline in Nigeria but remains a substantial environmental threat in many countries around the world. It is estimated that 5 percent of global natural gas production is flared annually.