Natural Gas Output Poised for 2020 Declines
While global oil production has absorbed the lion’s share of pandemic aftershocks, natural gas output, which was set to grow, is now set to fall by 2.6% this year, according to Rystad Energy. Associated gas from oil fields will be hit the hardest, losing some 5.5% compared to 2019 levels.
Before Covid-19, the firm expected total gas production to rise to 4,233 billion cubic meters (Bcm) in 2020, from 4,069 Bcm last year. This figure has been revised down to 3,962 Bcm for this year, rising to 4,015 Bcm in 2021 and to 4,094 in 2022.
Production from gas fields, which was expected to climb to 3,687 Bcm this year from 3,521 Bcm in 2019, is expected to reach 3,445 Bcm instead, rebounding to 3,485 Bcm next year and further to 3,551 Bcm in 2022.
While associated gas was expected to stay flat year-over-year, it is now expected to fall to 517 Bcm instead in 2020, rising to 530 Bcm in 2021 and 542 Bcm in 2022. Associated gas will likely only again exceed 2019 levels from 2023 onwards, according to the firm.
“Part of the recovery will be driven by optimism in future oil prices, which could gradually drive output from associated gas fields to near 600 Bcm by 2025,” said Carlos Torres-Diaz, Rystad Energy’s Head of Gas and Power Markets. “But how future oil prices really evolve will actually define the total natural gas output.”
The biggest drop in associated gas production will happen in North America, which makes up about half of the global output. From a level of 259 Bcm in 2019, gas output will fall to 246 Bcm in 2020 and remain flat in 2021. Only later will it start recovering, to 256 Bcm in 2022 and 269 Bcm in 2023, according to the firm.
As for other regions:
- Middle East output will fall from 95 Bcm in 2019 to 91 Bcm in 2020, recovering to 94 Bcm in 2021 and 99 Bcm in 2022.
- Russia will see its associated gas production falling from the 2019 level of 52 Bcm to 46 Bcm in 2020, recovering to 50 Bcm in 2021, marginally declining in years thereafter.
- Europe’s output will keep its 2019’s 38 Bcm levels flat into 2020, seeing an increase to 39 Bcm in 2021 and 2022, before peaking at 40 Bcm in 2023.
Rystad said if Brent prices stabilize at around $60 per barrel in 2025, this would lead to its base case associated gas production forecast of 596 Bcm in 2025. If prices stay closer to $40 per barrel, then there is a risk of associated production dropping below 500 Bcm. If Brent climbed closer to $120 per barrel, production from associated fields would recover quickly and have the potential to reach 800 Bcm by 2025, according to Rystad.
“While global gas demand for 2020 has been revised down to 3,883 Bcm due to the impact of Covid-19, a jump in consumption during 2021 because of continued low prices and recovering economic performance could lead to a tighter balance. Currently, the production forecast for 2021 is 4,015 Bcm, meaning that if demand grows more than 3%, the balance could tighten significantly. This would subsequently lead to higher prices, which could trigger a supply response,” the firm said in a statement.
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