Natural gas used to be an unwanted byproduct of oil production. Many oil companies simply burned it off because there wasn't a market for the gas. That has changed in recent years as the world has realized just how valuable this fuel is to modern society. Today the cleaner-burning, versatile fuel is used as a home heating fuel, a vehicle fuel, and a petrochemical feedstock, and for generating electricity. In 2013 alone, 3,346.6 billion cubic meters of natural gas were consumed globally, according to BP's (NYSE:BP) latest Statistical Review of World Energy. Here are the top five natural gas-consuming countries in the world.
No. 5: Japan
Japan consumed 116.9 billion cubic meters of gas in 2013. That was up 0.2% from its consumption in 2012 and represented 3.5% of the global total. Japan's numbers are up substantially since 2010 when it consumed just 94.5 billion cubic meters of gas. Virtually all of the country's natural gas was imported as Japan produces little of its own gas supplies. In fact, it's the world's No. 1 LNG importer and since 2012 has accounted for 37% of the global that market.
One reason Japan's natural gas consumption has increased so much over the past few years is because of the Fukushima Daiichi nuclear power plant accident in 2011. The country has shifted away from nuclear and is now using natural gas as a primary fuel for electricity generation.
No. 4: China
China consumed 161.6 billion cubic meters of gas in 2013, which was roughly 4.8% of global consumption and up 10.8% from 2012. Given its rapid demand growth rate the nation is expected to climb up this list in future years.
China, like Japan, is a big importer of natural gas. In 2013 it produced just 117.1 billion cubic meters of gas and imported the rest. While China is working to increase domestic gas supplies by unlocking its vast shale gas reserves, it isn't having much luck yet. This is why it is also increasing its access to imports, by pipeline from Russia and via LNG. One reason China wants to use more gas is because its heavy use of coal to generate electricity has made it the world's top emitter of carbon dioxide. It is looking to switch more of its power generation to cleaner-burning natural gas.
No. 3: Iran
Iran just beat China in 2013 as it used 162.2 billion cubic meters of natural gas. That was up 0.7% from 2012 and equated to about 4.8% of total global consumption. As with the U.S. and Russia, the primary reason Iran uses so much natural gas is because it's one of the world's top gas producers. In 2013 it produced 149.9 billion cubic meters of gas, which ranked it third globally at 4.9% of output. It also holds the world's second-largest proved natural gas reserves, at 17% of the global total.
In 2013 Iran's natural gas consumption was spread between residential and commercial at 34%, electric power at 28%, industrial consumption at 25%, transportation at 5%, and all others at 8%. In addition, Iran uses a lot of natural gas for enhanced oil recovery to increase its petroleum production. In 2012, for example, it reinjected more than 28 billion cubic meters of gas into its oil fields to boost production.
No. 2: Russian Federation
Russia is the second-largest consumer of natural gas. In 2013 it used 413.5 billion cubic meters, which was 12.3% of the world's total. That's actually down 0.4% from its consumption in 2012. Russia has abundant domestic production, which it heavily subsidizes, encouraging residential and industrial consumers to use more gas. Furthermore, as one of the world's coldest countries, demand for gas used for heating and electricity is high.
Russia is also the world's No. 2 natural gas producer, in 2013 producing 544.3 billion cubic meters, or 17.9% of the global total. Gas that is not consumed domestically is exported primarily to Europe. The nation also exports liquefied natural gas, primarily to Japan and South Korea.
No. 1: United States of America
The U.S. is by far the world's largest market for natural gas. In 2013 it used 737.2 billion cubic meters of natural gas, or 22.2% of the global total, according to BP's review. Natural gas consumption in the U.S. has steadily grown over the years, rising 2.4% in 2013 from the prior year. Of the four primary consumption markets for natural gas -- residential, commercial, industrial, and electric power -- usage increased in three, with consumption declining only for electric power.
One reason for the nation's high consumption level is because it is by far the world's largest natural gas producer and what gas isn't produced domestically can be easily imported from Canada. In 2013 the U.S. produced 687.6 billion cubic meters of gas, or 20.6% of the world's total. While the U.S. wasn't yet self-sufficient on natural gas in 2013, production has surged in recent years thanks to the discovery of massive shale gas reserves. This is leading to a significant decrease in imports from Canada and build out of export facilities to ship the expected excess American natural gas to foreign markets.
What was once an afterthought is quickly becoming an important fuel for the global economy. One of the biggest trends over the next few years will be China's growing demand for gas, which will provide an export outlet to top gas producers such as the U.S. and Russia. Meanwhile, changes in energy consumption, such as Japan's shift from nuclear to gas, will provide even more fuel for what appears to be a robust LNG export market over the next decade.
Matt DiLallo has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.