Total global gas production has been steadily increasing over the last seven years, with a potential for further growth. Shale gas production in North America is the key factor shaping the gas industry in the medium to long term. This article assesses the outlook for global gas, illustrated by three key drivers: production, remaining resources and breakeven prices.
Figure 1 shows global gas production split by region, from 2010 to 2025. Total volumes stood at 357 bcf/d last year and are anticipated to reach 372 bcf/d in 2018. North America is the largest gas producer in the world with output of 98 bcf/d expected this year.
About 70% of the total is contributed by shale gas production, with Marcellus Shale constituting the largest share of total shale volumes. Shale gas production in North America is estimated to continue its growth into the future, driving overall increase in gas volumes in the country amid forecasted declines in conventional onshore and offshore output.
Russia is currently the second largest gas producer in the world with production of nearly 67 bcf/d forecasted for 2018. Gazprom produces about 70% of the total volumes and has a full monopoly on gas exports by pipeline. Rosneft and Novatek contribute around 20% of the total output and increase their market share in the domestic market over time. In the last couple of years, gas production in Russia has been in decline driven by weak demand and geopolitical situation in the country.
However, the output has increased again last year, and Russia is estimated to have potential for further growth in the future. Fields located in the Bovanenkovo Zone play a key role in stable production output over the years to come.
Russia holds impressive gas resources, but many large discoveries are located in remote areas, which poses problems for commercial development. Therefore, we see few discoveries starting production before 2025. Middle East ranks third among the top gas producers in the world, with Iran, Qatar and Saudi Arabia representing more than 75% of total 62 bcf/d of gas expected to be produced in 2018. The region has promising potential for production increase in the long term, which comes from sanctioned and unsanctioned fields expected to be developed. If these projects start to produce as estimated, then Middle East could surpass Russia as the second largest gas producer by 2022.
Total global gas production is forecasted to reach 415 bcf/d by 2025 with North America contributing the largest share of total additions per year that average 4.2 billion cf/d during 2018-2025.
Figure 2 depicts the remaining dry gas resources by region and life cycle. Around half of the remaining global recoverable dry gas resources are located in North America, Middle East and Russia. North America is the region with the largest remaining gas resources, with over half of the volumes considered as upside potential (undiscovered life cycle), both from awarded and unawarded acreage.
Shale gas and associated gas from shale/tight oil formations makes up over 60% of North America’s remaining resources, with the largest contributions from Marcellus and Utica shale plays in the Appalachian Basin, the Montney play in Canada, as well as the Permian Basin and Eagle Ford Shale.
The Middle East shows the highest risked resource estimate (combined resources from producing fields, fields under development and unsanctioned discoveries). Offshore developments make up more than 60% of the region’s remaining gas resources, including key projects such as Iran’s South Pars and Qatar’s North Field.
Russia has an estimated 1,700 Tcf of remaining gas resources, with around 50% located in the Yamalo-Nenets area and the Kara Sea, and key projects including Gazprom’s Yamal Megaproject, Urengoyskoye, Yamburgskoye and Zapolyarnoye.
Figure 3 depicts average breakeven gas prices for new projects for the key gas producing regions globally. Breakeven prices are shown on the y-axis, and the distribution on the x-axis corresponds to total remaining gas resources. Based on Rystad Energy’s analysis, North America not only has the largest remaining gas resources, but also exhibits the lowest average breakeven gas price for new projects, which stands at 4.8 USD/kcf. Unconventional gas portfolio, especially the new wells in Marcellus and Utica shale plays, contribute the most to high commerciality of the region.
Middle East ranks the second with average breakeven price of just around 5.3 USD/kcf. Among countries included, Iran stands out as the country with the highest commerciality for gas projects in the region.
In Russia, the average breakeven price for new fields is higher, hovering around 6.3 USD/kcf, which reflects higher cost of development for the fields located in remote areas. Remaining regions not only have substantially lower gas resources, but also discoveries located there are more expensive to develop.
The average breakeven gas price in North and East Africa, as well as in Central Asia stands at above 7.5 USD/kcf. New projects in Australia, South East Asia and South America are relatively cheaper to develop, but on average a gas price of 6.6-7 USD/kcf is required for new fields in these countries to break even.
Conclusion
The global gas market is expected to see significant supply growth going forward, driven primarily by unconventional gas from North America. With the largest estimated remaining recoverable gas resources, North America is set to shape the gas supply outlook in the medium and long term. Moreover, as one of the regions with the lowest cost of supply to develop the vast gas resources, it is seen as competitive with other top gas-producing regions, Middle East and Russia.
Source: Rystad Energy
