Outages along with gas project delays from the slow pace of new final investment decisions (FIDs) in 2021 has led to record high and volatile prices and put gas supplies under pressure to the extent that further supply could be limited in the next few years, according to International Energy Agency's (IEA) new report published Monday.
The economic recovery following lockdowns from 2020 onwards combined with a succession of extreme weather events led to a 4.6% growth rate in global natural gas consumption that reached 4,109 billion cubic meters, the IEA said in its Gas Market Report for Q1, 2022.
Demand had gained a stronger growth of 7% in the first half of last year compared to the same period of 2020. However, the tightening of supply-demand fundamentals and increase in natural gas prices put the brakes on demand growth.
High natural gas prices impacted demand from industrial consumers who mainly switched to alternative fuels or reduced output in the last months of 2021.
According to the report, companies in energy-intensive sectors such as fertilizers, glass and steel had to decrease or suspend production due to high spot prices, especially in net importing markets like Europe and Asia.
In Europe, Dutch TTF prices rose about fivefold from their 2020 lows, while Asian liquefied natural gas (LNG) spot prices increased fourfold. In the US, Henry Hub's spot gas prices almost doubled last year from levels seen in 2020.
- Nearly 190 billion cubic meters of liquefaction capacity under construction
The IEA said inadequate supply caused both by LNG capacity outages and upstream underperformance led to the rapid tightening of the global gas market last year, some of which was because of disruptions to maintenance schedules caused by COVID-19 in 2020.
The agency further warned that in the absence of strong policies to curb demand growth to achieve net zero-emission targets, gas supply adequacy could emerge as a concern in the medium term with recent LNG project delays, the relatively small number of new LNG FIDs in 2020 and 2021 and a structural decline in upstream spending since the early 2010s.
LNG volumes lost to planned or unplanned outages totaled 53 billion cubic meters, equivalent to nearly 9% of nameplate capacity. Almost half of the lost LNG volumes were seen in Nigeria, Trinidad and Tobago and Malaysia.
The agency expects that project delays could further limit supply availability in the next few years.
'Of the nearly 190 billion cubic meters of nameplate liquefaction capacity under construction as of early 2021, about 20% was ahead of schedule, 35% was on time and 45% was delayed by an average of 14 months.
Delays are especially pronounced for projects that were initially targeting full capacity by 2024, including LNG Canada, Mozambique LNG and Golden Pass in the United States,' the report revealed.
- Global gas trade sees record growth
Global natural gas trade, including LNG and long-distance pipeline flows, increased over 9% year-on-year, or by 85 billion cubic meters (bcm).
This figure marked the largest year-on-year growth on record and was largely driven by strong demand recovery in key gas importing regions, including Asia Pacific, Europe and Central and South America.
Long-distance pipeline gas flows surged by 12%, or 55 bcm, year-on-year, accounting for almost 65% of global gas trade growth last year by largely recovering the losses of 2020.
Europe was one of the primary regions leading to the growth, as pipeline imports increased by around 11% amid the surging gas demand, plummeting domestic production and lower LNG flow.
Pipeline deliveries from Norway, North Africa and Azerbaijan, driven by the ramp-up of the Trans Adriatic Pipeline to Europe grew by 5%, 50% and 20% respectively in 2021.
Russia's pipeline gas exports to Europe increased by 4% in 2021 compared to 2020 levels, supported by a strong increase in deliveries to Turkey. Gas flow from Russia to the European Union via Belarus and Ukraine fell below 2020 levels last year.
The IEA head Fatih Birol in an earlier statement had accused Russia of reducing gas supplies to Europe at a time of increasing geopolitical tensions over Ukraine.
'We believe there are strong elements of tightness in the European gas market due to Russia's behaviour. Russia could increase deliveries to Europe by at least one-third,' he noted.
China's pipeline flows from Central Asia saw a growth of 10%, while deliveries from Russia via the Power of Siberia more than doubled, according to the report.
Global LNG trade expanded by 6% last year led by the Asia Pacific region. China's LNG imports grew by 17%, overtaking Japan for the first time last year as the world's largest LNG importer.
Global LNG trade is projected to grow by 4% this year as the demand expansion in Asia in 2021 moderates, and the drought-driven rise in South American imports reverses.
Asia is expected to account for all net increases in LNG imports, with China remaining the single largest contributor. India's LNG imports are forecast to register a 12% increase this year by returning to 2020 levels.
By Nuran Erkul Kaya
Anadolu Agency
energy@aa.com.tr