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.
In this article, we take a look at the world’s five largest natural gas producers, explore their production levels, and identify where the industry is headed.
The chart above highlights the output levels of the five leading natural gas-producing countries: the United States, Russia, Iran, Qatar, and Canada. The United States leads the pack with 687 billion cubic meters of natural gas produced, closely followed by Russia with 627 billion cubic meters of natural gas produced. The chart below outlines the natural gas production allocation as a percentage of total natural gas production measured in billion cubic meters. The United States leads the pack, accounting for 20.4% of total world output followed by Russia with 18.6% of total world output.
The United States is the world’s largest producer of natural gas, with estimated production of 687 billion cubic meters in 2013 accounting for about 20.4% 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 largest energy consumer. While only approximately 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.
Russia is the world’s second-largest producer of natural gas, with estimated production of 627 billion cubic meters in 2013 accounting for approximately 18.6% of the world’s total output. The country is also the largest exporter of natural gas, sending some 208 billion cubic meters 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 487.4 billion cubic meters, or 17% of global production, and accounted for about 14% of Russia’s gross domestic product exports in 2013 [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 Islamic Republic of Iran
The Islamic Republic of Iran is the third-largest producer of natural gas, with estimated production at 163 billion cubic meters in 2013 accounting for about 4.8% of the world’s total. According to the EIA’s country analysis report the country’s proven natural gas reserves amount to approximately 17% of the world’s total reserves [see also The Ten Commandments of Commodity Investing].
Iran has enormous potential as the country is producing only 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 has already expanded production and is shifting its focus on expanding LNG capacity.
Qatar is the world’s fourth-largest producer of natural gas, with estimated production of 155 billion cubic meters in 2013 accounting for approximately 4.6% of the world’s total. But the country is also the second-largest exporter of natural gas, sending 122 billion cubic meters abroad, and it 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 174,000 barrels per day in GTL capacity from its Oryx GTL and Pearl GTL projects.
Canada is the world’s fifth-largest producer of natural gas, with estimated production of 137 billion cubic meters in 2013 accounting for approximately 4% 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. 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].
The Bottom Line
Natural gas is rapidly growing in popularity around the world, as new techniques increase access to the 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.