Global Natural Gas Reserves, Commodity Trading Analysis
The state of global natural gas reserves is always a factor to consider for those considering exposure to commodities using the available trading and investment vehicles in the market.
When starting your commodity trading activity using say the highly liquid futures market, then having an overall picture of demand, supply and global reserves of this important energy resource, will give you an extra advantage.
So what is the state of the world’s natural gas reserves as we enter the 21st century, with the economic powerhouses of China and India expanding rapidly and demanding greater amounts of energy to sustain this growth?
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According to the BP Statistical Review of World Energy 2008, proved world natural gas reserves in 2007 were 177.36 trillion cubic metres (tcm), which represents an increase of 66% over the 20 years since 1987.
If we assume that current production and economic conditions remain broadly the same, then this suggests that there are just over 60 years of reserves left in the world, based on the reserves to production (R/P) ratio.
The most notable change is the 21% decline in North American reserves from 10.11 tcm to 7.98 tcm. While the Middle East saw a 135% increase to 73.21 tcm, Europe and the former CIS states increased their reserves by 32% to 59.41 tcm.
Considering the USA is a major consumer and producer of natural gas, its own proved reserves are only 3.4% of the world total and estimates suggest they will be depleted within 11 years of 2007.
Of course, there are data showing that total unproven US gas reserves are substantially more, around 1,530 trillion cubic feet, which if they were recoverable would dramatically change the outlook going forward.
This situation probably explains why there is a major programme of increasing the port facilities and supporting distribution infrastructure for the growing imports of liquefied natural gas into the USA.
Of the Latin American total (7.73 tcm), Venezuela contributes 67% with 5.15 tcm and these reserves are expected to last over 100 years at current production levels.
In Europe and the former CIS states natural gas reserves (33.5%) are dominated by the Russian Federation (44.65 tcm) with 25.2% of the world total and 75% for the whole of that region. Only Norway (2.96 tcm; 1.7% world total), Turkmenistan (2.67 tcm; 1.5%) and Kazakhstan (1.9 tcm; 1.1%) come anywhere close to Russian Federation reserves. By way of contrast, the UK which is now a net gas importer, only has 1.4 tcm (0.2%) in the North Sea.
Overall, the European and Former CIS region has reserves which are expected to last 55 years while the Middle East is the region with the largest natural gas reserves, 73.21 tcm (43%), which are estimated to last over 100 years.
While most of the European Union gets its natural gas supply from the Russian Federation, the fast developing countries in Asia, notably China and India, are looking to increase their supplies from Iran. Between them Iran and the Russian Federation hold 41% of proved world reserves of natural gas, and so relations between these two states and the major consumers will be crucial going forward.
Qatar and the UAE will be important to many Western European consuming states and we can see already how for example the UK is planning increases of LNG imports from the Persian Gulf area.
Whether you are looking to invest through an energy ETF which offers some exposure to this sector, or in a specific ETF such as UNG, or to trade natural gas futures contracts on NYMEX or ICE Futures Europe, a balance between technical analysis and fundamentals offers an effective way forward with greater chance of trading success.
The future direction of world energy policy will be determined to a significant extent by how we plan for depletion in crude oil reserves and maintain current levels of natural gas reserves through further discoveries.
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