The natural gas industry has exploded in size over the past several years, as new production techniques have increased reserves and driven down the commodity’s price. With the United States potentially holding enough reserves to last a century at current consumption levels, many see natural gas as both an economical solution to a potential energy shortage, and an environmentally friendly alternative to coal and other dirty fossil fuels [for more commodity news and analysis subscribe to our free newsletter].
In this article, we’ll take a look at the world’s five largest natural gas producers, explore their production levels, and identify where the industry is headed.
Russia is the world’s largest producer of natural gas, with estimated production of 677 billion cubic meters in 2011, accounting for about 20% of the world’s total. The country is also the largest exporter of natural gas, sending some 196 billion cubic feet abroad, focused primarily on the European Union where Italy, Germany, France, the United Kingdom and Spain are net importers.
The vast majority of this production is controlled by the state-owned Gazprom, which is publicly-traded in the United States as an ADR with the ticker symbol OGZPY. Rising from the Soviet Union’s Ministry of Gas Industry, the company single-handedly produces approximately 17% of global production, and accounted for about 8% of Russia’s gross domestic product in 2011 [see a Deeper Look At Russia's Commodity Industry].
Many politicians and market participants accuse Russia of using its natural gas prowess to influence politics, especially in the European Union. In September 2012, the E.U. launched an anti-trust campaign against Gazprom based on concerns that it was abusing its dominant market position in upstream gas supply markets and ultimately unfairly influencing prices.
The United States is the world’s second-largest producer of natural gas, with estimated production of 651 billion cubic meters in 2011, accounting for about 19.2% of the world’s total. Thanks to new unconventional shale and tight gas extraction technologies, this production could grow from some 20 trillion to over 30 trillion cubic feet between 2010 and 2030.
These production levels are important given the United States’ status as the world’s second-largest energy consumer and seventh-largest energy consumer per capita. While only about 22% of this energy consumption came from natural gas in 2010, some 95% of all natural gas consumed in 2011 was produced domestically, moving the country closer to energy independence [see 25 Ways To Invest In Natural Gas].
Despite the promise of cheap domestic energy, many concerns have surfaced regarding the environmental impact of hydraulic fracturing. The possible contamination of groundwater by hydraulic fracturing fluid that is injected under high pressure into the ground is a chief concern, while increased seismic activity is another major concern that could affect legislation.
Canada is the world’s third-largest producer of natural gas, with estimated production of 161 billion cubic meters in 2011, accounting for about 4.7% of the world’s total. In a country known for its production of tar sands heavy crude oil, natural gas is a cleaner opportunity that could reach more than $1 trillion in size, according to the Conference Board of Canada.
Natural gas production–centered in British Columbia and Alberta–has already reached a $24.5 billion per year run rate, but the industry is expected to invest some $386 billion between 2012 and 2035 to meet an estimated doubling in demand over the same period. Moreover, this growth could contribute some 6.2 million person-years of employment over the timeframe [see A Deeper Look At Canada's Commodity Industry].
Qatar is the world’s fourth-largest producer of natural gas, with estimated production of 151 billion cubic meters in 2011, accounting for about 4.5% of the world’s total. But the country is also the second-largest exporter of natural gas, sending 119 billion cubic meters abroad, and holds the world’s largest reserve of non-associated natural gas in its North Field.
While the country continues to maintain a moratorium on its North Field gas reservoir, the industry has been focused on building gas-to-liquid (“GTL”) infrastructure to convert natural gas into liquid fuels that can be more easily exported. Currently, the country has approximately 177,000 barrels per day in GTL capacity from its Oryx GTL and Pearl GTL projects.
Islamic Republic of Iran
The Islamic Republic of Iran is the fifth-largest producer of natural gas, with estimated production of 149 billion cubic meters in 2011, accounting for about 4.4% of the world’s total. According to the Iran Petroleum Ministry, the country’s proved natural gas reserves amount to approximately 29.61 trillion cubic meters, or about 15.8% of the world’s total reserves [see also The Ten Commandments of Commodity Investing].
Despite this enormous potential, the country is only producing a small share of its gas reserves, making it one of the few countries capable of supplying much larger amounts of natural gas in the future. The country plans to expand production by investing some $15 billion per year to grow capacity to 300 billion cubic meters by 2014 and focus on expanding LNG capacity.
The Bottom Line
Natural gas is rapidly growing in popularity around the world, as new techniques increase access to a cheap and plentiful source of energy. From Qatar’s conventional North Field to the United States’ unconventional shale plays, production of the commodity is set to rise over the coming years, while its lower CO2 emissions could help resolve some of the world’s air pollution problems.
Disclosure: No positions at time of writing.