Global natural gas consumption is expected to drop slightly in 2022 and grow slowly over the following three years as Russia’s war in Ukraine pushes up prices, according to the IEA’s latest Natural Gas Market Report.
Today’s record high gas prices are depressing demand and will be forcing some gas users to switch to coal and oil, while recent sharp cuts in Russian gas flows to Europe are raising alarms about supplies ahead of the winter.
The turmoil is damaging natural gas’ reputation as an affordable energy source, casting doubts about the role it was expected to play in helping developing economies meet rising energy demand and transition away from carbon-intensive fuels, IEA said.
The recent developments have led to a considerable downward revision of gas’ growth prospects. Global gas demand is set to rise by a total of 140 billion cubic metres (bcm) between 2021 and 2025, according to the new Gas Market Report – less than half the amount forecast previously and smaller than the 170 bcm increase seen in 2021 alone.
The downward revision in gas demand growth in the coming years is mostly the result of weaker economic activity and less switching from coal or oil to gas. Only one-fifth of it comes from efficiency gains and substituting renewables for gas, highlighting the need for greater progress on clean energy transitions.
Faster roll-outs of renewable power generation and stronger efforts to use energy more efficiently would ease pressures on energy prices and help price-sensitive emerging markets access gas supplies that can deliver rapid improvements to air quality and carbon intensity.
“We are seeing price spikes as countries compete for LNG shipments, but the most sustainable response to today’s global energy crisis is stronger efforts and policies to use energy more efficiently and to accelerate clean energy transitions,” said IEA Director of Energy Markets and Security Keisuke Sadamori.
The Asia-Pacific region is expected to account for half of the expected growth in global gas demand to 2025. In terms of sectors, industry is expected to account for 60 percent of global demand.
LNG export capacity additions will slow down in the next three years due to curtailed investment plans during a period of lower prices in the mid-2010s and construction delays due to Covid-19 lockdowns. While there has been a recent surge in LNG investment decisions, the resulting infrastructure will not be operational until after 2025, IEA said in its research report.