Natural gas grows to account for a quarter of global energy demand in the New Policies Scenario by 2040, becoming the second-largest fuel in the global mix after oil.

In resource-rich regions, such as the Middle East, the case for expanding gas use is relatively straightforward, especially when it can substitute for oil. In the United States, plentiful supplies maintain a strong share of gas-fired power in electricity generation through to 2040, even without national policies limiting the use of coal. 

But 80% of the projected growth in gas demand takes place in developing economies, led by China, India and other countries in Asia, where much of the gas needs to be imported (and so transportation costs are significant) and infrastructure is often not yet in place. This reflects the fact that gas looks a good fit for policy priorities in this region, generating heat, power and mobility with fewer carbon-dioxide (CO₂) and pollutant emissions than other fossil fuels, helping to address widespread concerns over air quality. 

But the competitive landscape is formidable, not just due to coal but also to renewables, which in some countries become a cheaper form of new power generation than gas by the mid-2020s, pushing gas-fired plants towards a balancing rather than a baseload role. Efficiency policies also play a part in constraining gas use: while the electricity generated from gas grows by more than half to 2040, related gas use rises by only one-third, due to more reliance on highly efficient plants.

A new gas order is emerging, with US LNG helping to accelerate a shift towards a more flexible, liquid, global market. Ensuring that gas remains affordable and secure, beyond the current period of ample supply and lower prices, is critical for its long-term prospects. LNG accounts for almost 90% of the projected growth in long-distance gas trade to 2040: with few exceptions, most notably the route that opens up between Russia and China, major new pipelines struggle in a world that prizes the optionality of LNG.

Gas supply also becomes more diverse: the amount of liquefaction sites worldwide doubles to 2040, with the main additions coming from the United States and Australia, followed by Russia, Qatar, Mozambique and Canada. Price formation is based increasingly on competition between various sources of gas, rather than indexation to oil. With destination flexibility, hub-based pricing and spot availability, US LNG acts as a catalyst for many of the anticipated changes in the wider gas market.

The new gas order can bring dividends for gas security, although there is the risk of a hard landing for gas markets in the 2020s if uncertainty over the pace or direction of change deters new investments.

Over the longer term, a larger and more liquid LNG market can compensate for reduced flexibility elsewhere in the energy system (for example, lower fuel-switching capacity in some countries as coal-fired generation is retired). We estimate that, in 2040, it would take around ten days for major importing regions to raise their import levels by 10%, a week less than it might take today in Europe, Japan and Korea.

http://www.iea.org/weo2017/