Jun 09 2016

Demand growth to dwarf gas production

While Australia’s gas industry discuss the LNG supply glut as new Australian and US projects start up, Energy Insider is contemplating a looming behemoth in energy demand. China and South East Asia are expected to see strong economic growth over the long term and coupled with strong population growth, urbanisation and electrification[i] their future energy consumption will dwarf Australia’s energy production.

The 6th edition of the APEC Energy Demand and Supply Outlook (produced by the Asian Pacific Energy Research Centre, APERC) shows that the APEC region makes up the world’s largest share of energy demand (Figure 1) and China is the region’s largest energy consumer after overtaking the USA in 2010 (Figure 2)[ii]. And APERC forecasts that energy demand from China will increase 50 per cent by 2040, from 1,943 Mtoe in 2013 to 2,875 Mtoe in 2040[iii]. The other major growth centre for energy demand is South East Asia which APERC forecasts to increase 110 per cent, from 410 Mtoe in 2013 to around 871 Mtoe in 2040. By comparison, Australia’s energy demand in 2013 was 81 Mtoe.

Figure 1 Total energy demand, APEC and rest of the world, 1990-2013

Source: APERC, 2016

Figure 2 Final energy demand by regional grouping, 1990-2013

Source: APERC, 2016

Despite China’s policies to deploy renewable energy, the scale of the projected rise in energy demand means it is still expected to be largely met by coal, gas and oil. In 2040, APERC forecasts that coal, oil and gas will still make up 56 per cent of total energy supply in China (assuming no policy changes from late 2015). Supply from hydro and other renewables are forecast to grow at annual rates of 2.0 per cent and 3.1 per cent respectively between 2013 and 2040.

By 2040, APERC forecasts a shortage in gas supplied in the APEC region which will create opportunities for increasing exports from Australia (Figure 3).

Figure 3 Net energy supply gap by regional grouping, 1990 to 2040

Source: APERC, 2016

Rising demand for gas from South East Asia (from 131 Mtoe in 2013 to 286 Mtoe in 2040) and China (from 140 Mtoe in 2013 to 610 Mtoe in 2040) is significant and drives the forecast shortage in gas in the APEC region by 2040[i]. Buildings requiring more electricity and industrial processing are the largest drivers of rising gas demand. In Australia, the strong outlook for gas demand from the South East Asian region and China points to strong demand for Australia’s gas resources (Figure 4).

Figure 4 China’s final energy demand by fuel compared to Australia’s supply, 2040

Source: APERC, 2016

With strong demand for Australia’s gas resources the long term outlook for domestic gas consumers is likely to be of a tight domestic gas supply. Energy Quest analysis of Australia’s existing gas reserves estimates a supply shortage of around 172 PJ (or 4.1 Mtoe[i]) in 2020 and around 205 PJ (or around 4.9 Mtoe) by 2025 due to international demand and expected falling production in the Australia’s southern fields[iv].

Gas can play a key role in assisting the integration of renewable energy to the grid, as a balance to the variability of wind and solar generation. Over a period in which gas fired electricity may be required as a flexible complement to renewable energy, gas may become expensive and difficult to contract.



[i] New China, 2016, Xi expounds on guideline for 13th Five-year Plan, http://news.xinhuanet.com/english/2015-11/03/c_134780377.htm

[ii] Asia Pacific Energy Research Centre, 2016, APEC Energy Demand and Supply Outlook 6th Edition, http://aperc.ieej.or.jp/publications/reports/outlook.php

[iii] Asia Pacific Energy Research Centre, 2016, APEC Energy Demand and Supply Outlook 6th Edition, volume II, p72, http://aperc.ieej.or.jp/publications/reports/outlook.php

[iv] Asia Pacific Energy Research Centre, 2016, APEC Energy Demand and Supply Outlook 6th Edition, volume I, p56, http://aperc.ieej.or.jp/publications/reports/outlook.php

[v] Calculated using the IEA’s conversion method, available at https://www.iea.org/statistics/resources/unitconverter/

[vi] Energy Quest, 2016, EnergyQuarterly May 2016

Related Analysis

Analysis

Gas outlook highlights peaking plant role in transition

Apart from raising some alarm bells over future potential gas shortfalls, the release of the Australian Energy Market Operator’s assessment of gas needs again highlighted the important role gas generation will play in the energy transition.  Gas generation is seen increasingly as a “strategic reserve for power system reliability and security” and “will be critical when it runs”. We take a look. 

Apr 04 2024
Analysis

Embedded networks, regulation and energy innovation: Is IPART on the right track?

The NSW Independent Pricing and Regulatory Tribunal (IPART) has undertaken a review of embedded networks and is grappling with how best to set prices to reach its objectives to incentivise customers and embedded network sellers to supply and use energy efficiently as well as enabling the efficient use of energy and encouraging sustainable energy solutions and accommodating innovation and investment in the energy sector. Not a simple task. Are they on the right track? We take a look.

Feb 15 2024
Analysis

2023 - The Year That Was

In recent years the pace and breadth of change and developments in the energy sector has been remarkable. Looking back over the past 12 months it is apparent that continues to be the case.

Dec 19 2023
GET IN TOUCH
Do you have a question or comment for AEC?

Send an email with your question or comment, and include your name and a short message and we'll get back to you shortly.

Call Us
+61 (3) 9205 3100