The global natural gas market is in a state of both volatility and transformation as post-COVID-19 demand trends, rising geopolitical tensions among major producers, and energy transition pressures impact supply, demand and prices. In 2022, the African Energy Chamber (AEC) (www.EnergyChamber.org) – through its Q1 2022 Outlook, the State of African Energy -foresees natural gas to take on a more prominent role in global energy chains, with African markets exploding in a flurry of investment and development.
On the short-term global reference price side, the near-term forward curve suggests continued high prices and volatility due to low storage and supply concerns in Europe that are expected to give the Dutch Title Transfer Facility (TTF) global price influence through much of 2022. The AEC’s average price forecast for 2022 is $16.7 per million British Thermal Units (MMBtu) for the TTF and $18.6/MMBtu for the Asian spot price. The Outlook expects the U.S. to be shielded from the international turmoil, with an improved production outlook for 2022 keeping the Henry Hub price at around $3.5/MMBtu.
Additionally, regarding short term global natural gas supply growth, both gas demand and gas production have consistently grown over the last decade, representing a trend that is expected to continue going forward as global decarbonization efforts intensify. On the back of Liquefied Natural Gas (LNG) supply delays, the long-term outlooks for TTF and Asia LNG prices have increased and a peak in gas price is expected in 2025. As new projects come online by 2027, the gas prices will see some downward pressure.
What’s more, the outlook regarding LNG supply and demand is strong. Notably, 2022 – 2023 supply vs demand levels suggest there is sufficient LNG supply to satisfy the demand, as new projects come online in 2022 such as Coral Floating LNG in Mozambique, Tangguh Train 3 in Indonesia and Calcasieu Pass in the U.S. During this time, LNG demand is expected to grow at a healthy CAGR of 5%. Despite the startup of key LNG projects including Arctic LNG 2, Golden Pass, Nigeria LNG Train 7 and Qatar’s North field expansion project, a supply deficit is expected from 2024 onwards. This is driven mainly by strong demand resulting from gas-fired power generation as increased environmental pressure stymies coal-fired generation.
“As per our report, the outlook for natural gas, and in particular LNG, remains strong. Representing the fuel of the future, and both a cleaner and more widely available resource, demand for gas will explode. It is, therefore, critically important for increased investment in new and existing gas projects, globally and in Africa. In order to keep up with demand and ensure price volatility is maintained, significant capital injections are required,” states Grace Orife, Board Member of African Energy Chamber.
Meanwhile, on the African gas supply front, Algeria, Egypt and Nigeria round to the top three natural gas producers in 2022 contributing to just over 80% of the overall natural gas flows from Africa. In Algeria, we see the gas sector in need of more investments and new major gas discoveries. In the medium term, we estimate the gas exports to fall below 30 Bcm by 2025 as more gas will need to be diverted to the domestic market. On the other hand, Egypt became a net exporter in the second half of the last decade due to the major discoveries such as Zohr coming on stream. Other projects such as Atoll, Nooros and West Nile Delta also contributed to the increasing supply. However, the lack of any new discoveries coupled with the ever-growing gas demand poses a challenge as the domestic consumption is set to outpace the supply by next year. Meanwhile, in Nigeria, 2021 volumes saw a low point at 1450 billion cubic feet. 2022 production is expected to see a healthy recovery to about 1780 billion cubic feet. The existing producing projects and the projects currently under development are expected to ensure the supply growth till about 2025. Post this, the producing fields are expected to see a steep decline going forwards and the supply heavily relying on the currently undeveloped discoveries and any brownfield investments on the existing projects that might enhance production.
Despite global and African gas demand growing significantly in 2022 and beyond, significant levels of investment are still required if supply is to be maintained and new discoveries developed. Representing the continent’s premier energy event, and the meeting place of a number of high-level industry executives from both African and international markets, African Energy Week (AEW) 2022 – the AEC’s annual event – has placed natural gas as a central point of discussion. Backed by data produced by the AEC, AEW 2022 is committed to ensuring Africa’s gas potential is realized, and that the continent is established as both a competitive and primary gas economy.
© Press Release 2021
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