Global natural gas demand is expected to rise by 3.6 per cent in 2021 before easing to an average growth rate of 1.7 per cent over the following three years, according to the International Energy Agency’s (IEA) latest quarterly Gas Market Report, which also provides a new medium-term forecast. By 2024, demand is forecast to be up 7 per cent from 2019’s pre-COVID levels.
Natural gas demand growth in 2021 mostly reflects economic recovery from the COVID-19 crisis, with demand anticipated to be driven in the following years in equal proportions by economic activity and by gas replacing coal and oil in sectors such as electricity generation, industry and transport.
Almost half of the increase in gas demand between 2020 and 2024 is expected to come from the Asia Pacific region, driven by China and India as well as by emerging markets in South and Southeast Asia.
Despite slower growth in the coming years, gas demand by 2024 is trending higher than the trajectories in the IEA’s climate-driven scenarios, notably the pathway set out in the recent Roadmap to Net Zero by 2050.
To get on track for net-zero emissions by 2050, the IEA states that new measures are needed to promote further fuel substitution and efficiency gains. This is especially the case in more mature markets, where much of the potential for switching from coal or oil to gas has already been realised.
Keisuke Sadamori, the IEA’s Director of Energy Markets and Security, said the rebound in gas demand shows that the global economy is recovering from the shock of the pandemic and that gas is continuing to replace more emissions-intensive fuels.
“But stronger policies need to be implemented to put global gas demand on a path in line with reaching net-zero emissions by 2050 while still fostering economic prosperity. These include measures to ensure gas is used more efficiently. At the same time, the gas industry needs to significantly step up efforts to shift to cleaner and low-carbon gases – and to act quickly and effectively to address needless methane emissions,” Sadamori said.
The new report examines how the gas industry can reduce its emissions footprint and align with net-zero emissions objectives. Key areas for action include continuing to reduce the intensity of the industry’s greenhouse gas emissions all along the value chain, supporting the development of low-carbon gases and developing carbon management solutions to minimise emissions from combustion.
The IEA notes that reducing methane emissions is an efficient way – in terms of both time and cost – of narrowing the industry’s footprint. Analysis from the IEA Methane Tracker shows as much as 40 per cent of current methane emissions could be avoided at no net cost.
According to the report, the increased gas demand forecast can be met by large conventional assets already under development, mainly in Russia and the Middle East.
Supply is also likely to be supplemented by new investment in US shale gas production to support export capacity for liquefied natural gas (LNG) that is currently under development.
The report notes the contribution of LNG to ensuring flexible and secure supplies, especially from the United States, which accounts for the large majority of additional LNG capacity to be commissioned in the coming three years.
Robust growth of the LNG carrier fleet will also make supplies more adjustable, with current order books representing a 25 per cent increase in the vessel count in the next two to three years. Underground storage capacity, another pivotal source of flexibility, is set to increase by 7 per cent over the forecast period.
However, without strong policy measures to curb gas demand in the long term, the IEA notes that market volatility and concerns over security of supply may arise towards the end of the report’s forecast period.
The full Gas Market Report, Q3-2021 can be found here.
