Global natural gas demand is estimated to fall by 2% this year as most countries impose lockdowns to curb the spread of COVID-19 pandemic which resulted in lower activity, Rystad Energy said late Monday.
A number of countries have applied strict lockdown rules to limit the spread of the virus which claimed the lives of 318,481 people around the world while the global tally for novel coronavirus infections surpassed 4.8 million late Monday.
The lowering activity as a result of the lockdowns and curfews around the world led to dramatic fall in oil demand. Rystad Energy foresees that gas demand is also to suffer from the slowdown.
"In absolute terms, we expect global gas demand to total close to 3,878 billion cubic meters (bcm) in 2020, down from 3,951 bcm last year. In our pre-COVID-19 estimates, this year’s natural gas demand was expected to grow to 4,038 bcm," Rystad Energy said in a statement.
However, low prices are shielding gas demand to some extent as the fuel remains more competitive than other sources of energy, especially in the power sector where gas use remains relatively stable in most countries, it said.
"2020 will be the first year since 2009 where there will be no growth in consumption. This will be a hard blow for an industry accustomed to yearly growth rates of more than 3%," Rystad Energy’s Head of Gas and Power Markets Carlos Torres-Diaz was quoted as saying in the statement.
The impact on gas demand has varied substantially from country to country depending on the severity of lockdown measures and factors such as the power mix and industrial activity. Countries with capacity to switch from coal to gas will see less effect from the demand drop.
Italy is one of the countries that have been the most affected by COVID-19 and as a result the government decided to impose a strict lockdown starting in the beginning of March.
The average loss in gas demand from the power and industrial sectors has been a staggering 23% over the duration of the lockdown, Rystad Energy data shows. Other European countries have seen similar effects, with the International Energy Agency estimating a total loss in weather-adjusted gas demand of 25% in France and 19% in the UK.
However, the US gas demand continues to increase as a result of increasing demand from the power sector.
The possibility of new lockdowns, the slowdown in economic growth and the effect of stimulus packages on reactivating commercial and industrial activity could all tip the gas-demand scale, said in the statement.
Rystad Energy has forecasted natural gas production to be around 4,000 bcm this year based on the lower investment activity.
By Nuran Erkul Kaya