Underground Construction - November 2017 - 10

By Jeff Awalt Executive Editor

Global
Energy,
Pipeline
Outlook

D

Despite ongoing challenges, there
is growing confidence among analysts that 2017 marks a turning
point in several key areas that
drive long-term demand for natural gas development and pipeline
construction.
A Barclays survey projected
global exploration and production
spending to increase 7 percent
this year, driven by a 27 percent
increase in North America spending, compared with a 38 percent
decline in 2016. International
spending was predicted to increase
2 percent versus an 18-percent decline last year.
Wood Mackenzie projected that
exploration will turn profitable
after five years of only single-digit returns. The firm reported 15
upstream projects reached final
investment decision (FID) in the
first six months of 2017 and could
more than double to 25 by year
end, compared with only 12 in all
of 2016.
"There are positive signs that
the upstream industry is continuing on the road to recovery
and that the more-competitive
conventional projects are moving
down the cost curve sufficiently

10

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to attract new investment," said
Angus Rodger, research director,
Asia-Pacific upstream at Wood
Mackenzie.
Douglas-Westwood's "World
Onshore Pipelines Market Forecast" offered more reason for
optimism over the next five years,
projecting global installations will
exceed 171,500 miles. Douglas-Westwood said total onshore
pipeline capital expenditures are
expected to increase about 5 percent through 2021 to $203 billion,
compared with $194 billion in the
preceding five years, with North
America and Asia accounting for
53 percent of global spending over
the forecast period.

Market trends
Preliminary estimates by Cedigaz
show global natural gas demand
in 2016 continued to grow at an
annual rate of 1.6 percent to 3,528
Bcm, while low prices and harsh
upstream conditions caused global
natural gas production to stagnate,
marking a break in the average
growth rate of 1.8 percent during
the previous five years. In BP's
June 2017 "Statistical Review of

World Energy," Group Chief Executive Bob Dudley wrote, "This is
the weakest growth in gas output
for 34 years, other than in the immediate aftermath of the financial
crisis."
Cedigaz Chief Economist Armelle Lecarpentier projects global
demand for natural gas will grow
approximately 1.6 percent a year
through 2035 - down from a
2.2 percent annual growth rate
in 1990-2015-due to improved
energy efficiency and expanding
renewables. Emerging economies
represent over 85 percent of
the projected growth in demand.
China alone accounts for 28 percent of the projected demand
growth, Lecarpentier said, followed
by the Middle East at 24 percent.
"In percentage terms, renewables is the fastest growing category, but in absolute terms, natural gas will still have the largest
growth, and we see the growth in
absolute consumption of natural
gas will outstrip that of all other
energy resources," Lecarpentier
said. He added that the main drivers to growth include the expected
strong expansion of LNG supply
and the vast availability of resourc-

es, with supplies boosted by unconventional gas in North America
and Asia, as well as conventional
gas in Russia and the Middle East.
"We anticipate significant
expansion of intra-regional and
long-distance pipeline trade and
a crucial need to build new infrastructure in emerging markets of
the world, including Asia, Africa,
the Middle East and South and
Central America," Lecarpentier
said. "LNG will have a growing
share in inter-regional trade, driven by emerging markets - especially China and India, but also new
markets in Asia. Pipeline gas is
also important to India and other
markets that will seek to diversify
their supply."
Deloitte forecasts the average
price of natural gas at the benchmark Henry Hub will increase
from $3.10 in 2017 to $4 in 2027.
For the same 10-year period,
Deloitte projects increases from
$5.20 to $6.10 for UK-NBP, and
from $2.70 to $3.80 for India domestic gas. It projects the average
price per barrel of WTI Spot will increase from $48 in 2017 to $70 in
2022, and Brent Spot to grow from
$49 in 2017 to $71 in 2022.
Underground Construction November 2017
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Underground Construction - November 2017

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