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GLOBAL MARKET FOR GAS

In 2018, the global gas market experienced a 4.8% growth in demand, with 70% of that growth coming from the United States and China. The growth in the global gas market can be attributed to increasing in conventional, as well as, relatively unconventional applications, such as Autogas (which experienced 40% increase in consumption in the 10 years). The gas market is connected to the oil market, but they do not necessarily follow the same trends as they have different market drivers; this is why the gas market experienced growth in demand while the oil market grew by 1%, between 2017 and 2018.

Where Does Natural Gas Come From?

A good starting point to understand the gas market will be from its source. Hydrocarbons - crude oil and natural gas, are formed due to the pressurization of decayed organic matter over millions of years. This occurs in a naturally occurring underground reservoir. Each reservoir has a range of hydrocarbon products in it, from natural gas (methane to butane, with the presence pentane to heptane), to crude oil, as well as asphalt. The Gas to Oil Ratio (GOR) determines whether the gas is referred to as Associated Gas (i.e. gas from an oil well) or Non-Associated Gas (i.e. gas from a gas well). The GOR used by the United States Energy Information Agency is 6,000 cubic feet (cf) of gas to 1 barrel (b) of oil (6000 cf/b). Therefore a well whose GOR equal to or less than 6,000 cf/b is an oil well, gas produced from that well is referred to as Associated Gas. The major products from the separation of hydrocarbon gas are Natural Gas (methane and ethane) and Liquefied Petroleum Gas.

Figure 1. Natural Gas and its Products

Source: (GECF, 2016)

Gas Value Chain

Natural gas can be divided based on its constituents into different products, such as Natural Gas Liquids, Liquefied Petroleum Gas (LPG), Compressed Natural Gas, etc. These products might differ due to composition or physical state (e.g. liquid or gas).

There are different sectors in the petroleum industry which include:

Upstream sector: this is where the exploration and production occurs
Midstream sector: this is where the refining, or processing occurs.
Downstream sector: this is where the product is connected to the end-user.

Natural gas is produced then separated into different products with different (sometimes overlapping) applications, hence their different value chains.

Natural Gas (Sales Gas): this is the mixture of methane and ethane, used mostly by industries for different processes such as electricity production, or fertilizer production. It is transported via pipelines (quantity traded is known by measuring the flow rate of the gas at the exchange of ownership). Pipelines are channelled to the end-users which are industrial or commercial entities.

Figure 2. Natural Gas Value Chain

Source: (GECF, 2016)

Liquefied Petroleum Gas: this composes of pentane and butane, used mostly for cooking, and is finding increasing application in the automobile industry as Autogas. LPG is transported via pipelines, ships and trucks, based on the sector (upstream, midstream or downstream). When imported, LPG comes through a depot which is then transported to various gas plants from which it is connected (sometimes through retailers) to the end-users in cylinders.

Figure 3. LPG Value Chain

Liquefied Natural Gas: natural gas is liquefied, after which it is stored then transported via land or ship (depending on the destination) to the end-users for power generation, transportation, etc. It is re-gasified before use.

Figure 4. LNG Value Chain

Source: (Hoegh LNG, 2020)

MAJOR PLAYERS IN THE GAS INDUSTRY

Oil and gas, as natural minerals, occur in different regions all over the world and are consumed in nations all over the world as well. The total recoverable (i.e. economically viable recovery) amount of oil and gas is referred to as oil and gas reserves, and they vary per country, with some countries having trillions of cubic meters of natural gas in their reserves and some countries having none. Two other factors measured are the annual production and annual consumption, which vary per country and also change with time due to economic reasons, or technology available, amongst other reasons. For instance, US crude oil production tripled between 2010 and 2020 due to the introduction of the hydraulic fracturing technology which made shale oil recoverable. Lastly, these activities are carried out by private companies and state-owned companies, sometimes in joint-ventures with each other. Certain companies have more presence globally than others (e.g. Shell operates in 70 companies globally) (Shell, 2020).

Natural Gas Reserves: Reserves refer to the total quantity of oil and gas that can be recovered under current economic, technological and political conditions, in a country. Russia has the world’s largest gas reserves, boasting of 47.8 trillion m3 of natural gas. Russia is followed by Iran and Qatar in size of gas reserves, with 33.7 trillion m3 and 24 trillion m3 respectively. What countries do with their reserves depends on their governments. These top ten nations have a combined gas reserve size of 148 trillion m3 of natural gas.

Figure 5. Top Ten Countries with the Highest Natural Gas Reserves