Demand for natural gas will face its largest annual decline in history, the International Energy Agency said in a new report.
Natural gas demand is expected to drop 4 percent, or 150 billion cubic metres (bcm).
The combination of the Covid-19 crisis and a mild winter in the northern hemisphere are the main reasons for drop in the demand for natural gas.
All major gas markets are experiencing falls in demand or slumps in growth, according to the IEA’s latest annual market report Gas 2020.
For the full year, more mature markets across Europe, North America and Asia are forecast to see the biggest drops, accounting for 75 percent of the total decline in gas demand in 2020, the report said.
“Natural gas has so far experienced a less severe impact than oil and coal, but it is far from immune from the current crisis. The record decline this year represents a dramatic change of circumstances for an industry that had become used to strong increases in demand,” said Fatih Birol, executive director of IEA.
Global oversupply is pushing major natural gas indices to record lows, while the oil and gas industry is cutting spending and postponing investment decisions to make up for the significant shortfall in revenue.
After 2021, most of the increase in demand takes place in emerging Asia, led by China and India where gas benefits from strong policy support. Repercussions from the Covid-19 crisis are set to result in 75 bcm of lost annual demand by 2025, which is the same amount as the increase in global demand in 2019.
The main drivers of future supply growth – US shale and large conventional projects in the Middle East and Russia – are also under pressure from the current oil price collapse and uncertainty surrounding demand trends over the short and medium term.
Liquefied natural gas (LNG) is set to remain the main driver of the international gas trade. The investment in LNG projects during 2018 and 2019 will bring additional export capacity in North America, Africa and Russia. Slower growth in global gas demand in the coming years is likely to result in capacity outpacing LNG imports through 2025, limiting the risk of a tight LNG market for the time being.