Global natural gas demand is expected to rebound by 3.6% this year and by about 7% by 2024, surpassing pre-COVID-19 levels if governments do not implement strong policies to curb gas demand and put the world on a path towards net-zero emissions by the mid-century, a new report from the International Energy Agency (IEA) said Monday.
Natural gas demand dropped by around 1.9%, or 75 billion cubic meters (bcm) in 2020 due to lockdown measures taken to curb the spread of the pandemic, and due to mild winter conditions in the northern hemisphere.
The growth in natural gas demand this year reflects the economic recovery from the COVID-19 crisis, the IEA said in its latest quarterly Gas Market Report: Analysis and Forecast to 2024.
This revival, however, is at lower average rates but is still too high to be compatible with net-zero targets in the long term, the report said.
Nevertheless, economic activity and gas replacing other more polluting fuels, such as coal and oil, particularly in electricity generation, industry and transportation sectors are due to drive demand over the next few years.
'The rebound in gas demand shows that the global economy is recovering from the shock of the pandemic and that gas is continuing to replace more emissions-intensive fuels,' Keisuke Sadamori, the IEA’s director of energy markets and security, said.
The IEA predicts that almost half of the increase in gas demand from 2020 to 2024 will come from the Asia Pacific region.
- Industrial sector is main contributor to gas demand growth
Although global natural gas demand will slow down to 1.7% from 2021 to 2024, it is set to increase higher than the trajectories in the IEA's climate-driven scenarios by 2024 reaching 4,300 billion cubic meters (bcm), 7% up compared to the pre-pandemic levels in 2019.
The main driver of the growth to 2024 is expected to be the industrial sector with its consumption growing at an average annual rate of 3.4%
'Stronger policies need to be implemented to put global gas demand on a path in line with reaching net-zero emissions by 2050 while still fostering economic prosperity. These include measures to ensure gas is used more efficiently. At the same time, the gas industry needs to significantly step up efforts to shift to cleaner and low-carbon gases and to act quickly and effectively to address needless methane emissions,' Sadamori noted.
'From 2020 to 2024, the substitution of gas and efficiency gains reduce natural gas demand by 80 bcm, mostly in power generation, moderating a gross demand increase of 430 bcm to a net increase of 350 bcm. The return to economic growth driven by the industrial sector and led by Asia’s fast-growing markets remains the principal driver of rising gas consumption, accounting for almost two-thirds of the gross demand increase to 2024,' the report calculated.
The IEA suggested that key areas for action for the gas industry to reduce its emissions footprint and align with net-zero emissions targets include continuing the intensity of the industry's greenhouse gas emissions all along the value chain, supporting the development of low-carbon gases, and developing carbon management solutions to minimize emissions from combustion.
Reducing methane emissions is an efficient way to narrow the industry's footprint, the report said.
- Supply concerns may arise
Global gas production is set to increase by 6% by 2024 from its levels in 2019.
The report found that already approved or under development conventional assets, mainly in Russia and the Middle East, could meet the increasing demand along with new investments in US shale gas production to support export capacity of liquefied natural gas (LNG) that is currently under development.
According to the IEA, the US will account for the large majority of additional LNG capacity to be commissioned in the next three years.
'Robust growth of the LNG carrier fleet will also make supplies more adjustable, with current order books representing a 25% increase in the vessel count in the next two to three years. Underground storage capacity, another pivotal source of flexibility, is set to increase by 7% over the forecast period,' the report said.
However, the IEA warns without strong policy measures to curb gas demand in the long term, market volatility and concerns over the security of supply may arise towards the end of the report’s forecast period.
By Nuran Erkul Kaya