Natural gas demand is set to rebound strongly in 2021 but expected to slow down in the following years, said a new report by the International Energy Agency (IEA).
“Global gas demand is expected to rise by 3.6 percent in 2021 before easing to an average growth rate of 1.7 percent over the following three years,” said IEA’s latest quarterly Gas Market Report.
However, the demand will keep rising if the governments do not implement strong policies to move the world onto a path towards net-zero emissions by mid-century.
Natural gas demand growth in 2021 mostly reflects economic recovery from the COVID-19 crisis, the report said.
“But it’s set to be driven in the following years in equal proportions by economic activity and by gas replacing other more polluting fuels such as coal and oil in sectors such as electricity generation, industry and transport.”
Almost half of the increase in gas demand between 2020 and 2024 comes from the Asia Pacific region.
Despite slower growth in the coming years, gas demand by 2024 is trending higher than the trajectories in the IEA’s climate-driven scenarios, notably the pathway set out in the recent Roadmap to Net Zero by 2050.
“This is especially the case in more mature markets, where much of the potential for switching from coal or oil to gas has already been realized,” the report said.
“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,” said Keisuke Sadamori, the IEA’s Director of Energy Markets and Security. “But 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,” Sadamori said.
“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.”
The new report examines how the gas industry can reduce its emissions footprint and align with net-zero emissions objectives.
The key areas for action include continuing to reduce 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 minimise emissions from combustion. In particular, reducing methane emissions is an efficient way – in terms of both time and cost – of narrowing the industry’s footprint.
The increased demand forecast in the report can be met by conventional assets that were already approved or under development before the pandemic, mainly in Russia and the Middle East.
Supply is also likely to be supplemented by new investment in US shale gas production to support export capacity for liquefied natural gas (LNG) that is currently under development.
The report notes the contribution of LNG to ensuring flexible and secure supplies, especially from the United States, which accounts for the large majority of additional LNG capacity to be commissioned in the coming three years.
Robust growth of the LNG carrier fleet will also make supplies more adjustable, with current order books representing a 25 percent increase in the vessel count in the next two to three years, it said.
Underground storage capacity, another pivotal source of flexibility, is set to increase by 7 percent over the forecast period, the report added.