The International Energy Agency has lowered its three-year growth forecast for global gas demand as the Russia-Ukraine war drives prices to record highs and stokes fears of further supply disruptions.
Global gas demand is set to rise by a total of 140 billion cubic metres (bcm) between 2021 and 2025 — less than half the amount forecast previously and smaller than the 170 bcm increase in 2021 alone, the Paris-based agency said in a report on Tuesday.
"The turmoil is damaging natural gas' reputation as a reliable and 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 more carbon-intensive fuels," the agency said.
"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 a fifth of this switch has come from efficiency gains and the substitution of renewables for gas, highlighting the need for greater progress in the clean energy transition, the report said.
Quicker adoption of renewable power and stronger efforts to use energy more efficiently would ease pressure on costs and give price-sensitive emerging markets access to gas supplies, resulting in improved air quality, it said.
Europe is working to reduce its dependence on Russian energy as the war drives up oil and gas prices, and stokes inflation.
Gas demand has fallen after the end of the winter heating season but European utilities are racing to refill storage before next winter, with prices high and supplies uncertain.
“Russia’s unprovoked war in Ukraine is seriously disrupting gas markets that were already showing signs of tightness,” said Keisuke Sadamori, IEA director of energy markets and security.
“We are now seeing inevitable price spikes as countries around the world compete for LNG [liquefied natural gas] 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.”
The Asia-Pacific region is expected to account for half of the growth in global gas demand to 2025, according to the report.
In terms of sectors, industry is expected to account for 60 per cent of global demand for gas. However, these projections are subject to downward risks from high prices and potentially lower economic growth, the energy body said.
The EU's commitment to phase out gas imports from Russia — the largest gas supplier historically — is having global repercussions as Europe’s surging demand for LNG draws in deliveries initially intended for other regions.
The report's findings indicate that Russian pipeline gas exports to the EU will fall more than 55 per cent between 2021 and 2025, while also considering an accelerated case in which they fall more than 75 per cent.
LNG export capacity additions are set to slow down in the next three years as a result of curtailed investment plans during a period of lower prices in the mid-2010s and construction delays stemming from Covid-19 lockdowns, according to the report.
This raises the risk of prolonged tight market conditions, the IEA said.
While there has been a recent surge in LNG investment decisions, the resulting infrastructure will not be operational until after 2025, the agency said.
