The 2013 Natural Gas Year in Review. CEDIGAZ' First Estimates

The world gas expansion had already shown its limits in 2012 when apparent gas demand had only increased by 2.3%, down from an average growth of 2.8% per year in the previous decade. In 2013, the growth in apparent gas demand slowed even more substantially to 0.8%, according to CEDIGAZ's first estimates. The growth of natural gas has been limited by several factors on both the demand and supply sides against a background of economic and geopolitical turmoil. On the demand side, natural gas still suffers in particular from severe competition with coal in the power generation sector. The singular case of the European gas market is quite instructive. However, natural gas continued to gain ground against fuel oil in most markets. Japan's power generation mix was nuclear free by the end of the year, due to the maintenance period on the two reactors still in operation, despite strong support from the government to restart some of the country's 50 reactors. However, the recourse to LNG imports to compensate for the nuclear shortfall was less apparent in 2013, as conservation measures by consumers in a context of high import prices reduced electricity consumption. Japan's gas demand is now limited by the capacity of both its LNG importing infrastructures and combined-cycle gas power plants. The future pace of restarts of nuclear reactors in Japan remains a matter of speculation. Japan's nuclear malaise has spilled over into neighbouring South Korea, where reactors have been shut by a safety certificate scandal and by other safety issues. These developments create further uncertainties on the LNG demand prospects in Northeast Asia. The global growth in natural gas has been increasingly constrained by supply and investment issues. On the supply side, the gas supply shortfall is generally due to the decline of mature and conventional fields, and an insufficient renewal of reserves. In most regions the reserves-to-replacement ratio has followed a downward structural trend since the early 1990's with the exception of the USA, the latter having benefited from the shale gas revolution. The lack of upstream investment is especially acute in emerging markets, due to a lack of a favourable economic, regulatory and fiscal climate. The issue of investments is not only critical on the upstream side. The lack of infrastructures at all levels of the gas chain is also a major source of supply shortage in most emerging markets. The moderation of natural gas supply and investment has also been increasingly driven by political challenges. The upstream industry has become more aware of the importance of above-ground geopolitical risks. The Middle East-North Africa region has become synonymous with the heightened risks of supply disruption. Deterioration of security, internal conflicts and damage to infrastructures have caused some production outages and supply disruptions (Libya-Italy pipeline, Nigeria, Algeria's In Amenas, Arab Gas Pipeline, Syria, etc.). In 2013, marketed production fell especially heavily in Africa, affected by internal political tensions that led to force majeure in Libya and Nigeria. With the exception of Europe, other regions posted positive production gains, the largest of them were recorded in the C.I.S (+ 2.7%) and the Middle East (+ 3.4%). In a nutshell, 2013 was a year which presented the challenges faced in developing new supply to meet growing demand, especially in emerging markets