Global natural gas demand is set to slow in the coming years amid declining consumption in mature markets due to an “accelerated” roll-out of renewables and improved energy efficiency, according to the International Energy Agency.
Demand is projected to grow by 1.6 per cent a year between 2022 and 2026, down from an average of 2.5 per cent a year between 2017 and 2021, the Paris-based agency said in its Gas 2023 Medium-Term Market Report on Tuesday.
“The world’s gas markets have entered a new and more uncertain period that is likely to be characterised by slower growth and higher volatility – and could lead to a peak in global demand by the end of this decade,” said Keisuke Sadamori, IEA director of energy markets and security.
“We expect a substantial increase in new LNG [liquefied natural gas] capacity coming online in the years ahead, which should ease some of the tightness and security of supply concerns.”
The trends are different across regions, with demand declining in mature markets but continuing to grow in emerging and developing economies, he added.
Overall gas demand from mature markets in Asia Pacific, Europe and North America peaked in 2021, and is forecast to decline by 1 per cent annually up to 2026, the report said.
Europe has ramped up renewable energy deployment after Russia drastically reduced its gas supplies to the continent in response to economic sanctions.
Meanwhile, growth in gas demand is expected to be “highly concentrated” in fast-growing Asian markets as well as some gas-rich economies in the Middle East and Africa, the agency said.
China, the world’s second-largest economy, is set to account for about half of the total growth in demand until 2026 as the country uses the fuel for industrial production and power generation.
Meanwhile, global LNG capacity is expected to expand by 25 per cent from now until 2026, with the US consolidating its position as the world’s largest exporter of the supercooled fuel through the construction of liquefaction plants, the agency said.
“Growth in LNG supply signals a shift to a more globalised gas marketplace, which will improve resiliency and the ability of suppliers and consumers to respond to supply and demand shocks,” the IEA said.
Rising LNG imports and high storage levels are “no guarantee” of stable natural gas prices throughout the winter season, particularly in the event of exceptionally cold weather.
In the first three quarters of the year, European hub and Asian spot LNG prices averaged 70 per cent and 60 per cent below their 2022 levels, respectively.
However, they have remained well above their historical averages, the agency said.
“Steep demand reductions in Europe and some Asian markets helped reduce strains, but supplies remain tight,” the IEA said.
“The increase in LNG supply was not enough to offset the sharp declines in deliveries of pipeline gas from Russia to Europe.”
The supply of low-emissions gases such as hydrogen and biomethane is projected to “more than double” through to 2026, with Europe and North America representing 70 per cent of the growth, the IEA said.
“The development of low-emissions gases in these markets benefits from a wide range of policies, increasingly sophisticated subsidy schemes and well-developed, interconnected gas networks,” it added.