Rystad Sees Global Gas Output Down 2.6% in 2020
The impact of the Covid-19 pandemic on the world’s economies will push global natural gas production down 2.6% this year, Rystad Energy said June 24, with associated gas production taking the biggest hit.
Prior to Covid-19 – which forced a “new reality” on the energy world – Rystad expected total natural gas production to rise to 4,233bn m3 in 2020, from 4,069bn m3 in 2019. Its new forecast pegs global gas output at just 3,962bn m3 this year, rising to 4,015bn m3 in 2021 and to 4,094bn m3 in 2022.
Production from natural gas fields – initially expected by Rystad to rise to 3,687bn m3 this year from 3,521bn m3 in 2019 – will slip to 3,445bn m3 this year before recovering to 3,485bn m3 in 2021 and to 3,551bn m3 in 2022.
The impact on associated gas production, however, will be much more dramatic in percentage terms: production this year was first projected to remain flat at around 547bn m3; now, Rystad says, it will fall about 5.5% this year, to 517bn m3, and will not regain 2019 levels until 2023 – assuming oil prices continue to recover.
“Part of the recovery will be driven by optimism in future oil prices, which could gradually drive output from associated gas fields to near 600bn m3 by 2025,” said Carlos Torres-Diaz, who heads gas and power markets research for Rystad. “But how future oil prices really evolve will actually define the total natural gas output.”
Rystad’s own price forecasts see Brent crude stabilising at around $60/barrel in 2025, leading to its base case forecast for associated gas production recovering to 596bn m3 by 2025. But if Brent stalls at its current level of around $40/b, there is a risk that associated gas production could drop below 500bn m3, the consultancy says.
Rystad has already projected global gas demand will slip to 3,883bn m3 in 2020, but if low prices persist – it projects Henry Hub will average $2.70/mn Btu in 2021 – and economies continue to recover, gas consumption could rise in 2021, bringing supply and demand closer together.
“Currently, the production forecast for 2021 is 4,015bn m3, meaning that if demand grows more than 3%, the balance could tighten significantly,” Rystad says. “This would subsequently lead to higher prices, which could trigger a supply response.”