Executives in the natural gas industry expect strong demand for the fuel in Asia through 2040 and 2050 as countries continue their coal-to-gas switch policy and look to meet emission reduction goals.
Recent estimates and reports diverge from the International Energy Agency's (IEA) peak fossil fuel demand projections announced in recent weeks. The IEA expects demand for all three fossil fuels - oil, coal, and natural gas - to peak before the end of this decade.
Peak Gas Demand?
The IEA said in its World Energy Outlook 2023 in October that global natural gas demand growth will slow down this decade compared to the decade to 2021 and peak by 2030, under its conservative Stated Policies scenario (STEPS).
In this scenario, natural gas demand growth between 2022 and 2030 would be much lower than the 2.2% average rate of growth seen between 2010 and 2021, according to the IEA. Global gas demand is set to peak by 2030, maintaining a long plateau before gradually declining by around 100 bcm by 2050, the agency said. Related: U.S. Crude Production Breaks Records
Weeks before the energy report, the IEA published its medium-term report on gas markets and demand, in which it said that demand growth globally would be structurally lower, with Asia and the Middle East driving consumption.
Overall gas demand from mature markets in Asia Pacific - Australia, Japan, Korea, New Zealand, and Singapore, as well as Europe and North America - peaked in 2021, and is forecast to decline by 1% annually through to 2026, according to the report.
Europe is headed for structurally lower gas demand amid energy savings, higher share of renewable sources in the power generation mix, and the EU's decarbonization goals, analysts and industry officials have said.
Gas demand in the EU was 12% lower in 2022 than the 2019-2021 average, driven by falling industrial and household gas demand, researchers at Brussels-based think tank Bruegel wrote in October.
In 2023, the greater availability of alternative power generation helped with significant gas demand reduction in the power sector, too.
Some of the lost European demand for natural gas due to the energy crisis and record-high prices could never return, Vitol Group's chief executive Russel Hardy said earlier this month.
"For gas, demand has plummeted in Europe, with double-digit percentage reductions. We expect some of the lost demand to be permanent," Hardy told the Energy Intelligence Forum in London.
Industry Much More Bullish Than IEA
While industry executives expect a part of Europe's gas demand to have been lost for good during the energy crisis last year, they do not see demand in Asia slackening anytime soon, and certainly not before 2030.
Gas industry delegates who attended earlier this month an LNG conference in Singapore organized by S&P Global expect natural gas demand in Asia to jump by more than 50% by 2050, Energy Intelligence's Clara Tan reports.
McKinsey & Co, a consultancy, sees global natural gas demand rising through 2040 in most scenarios in a report launched at the Energy Intelligence Forum. According to McKinsey & Co, gas will still have a key role to play in providing flexible power supply to balance the growing share of renewables until energy storage becomes mainstream to deal with the intermittency of solar and wind.
Under most scenarios of how the world energy demand and mix will evolve, natural gas will be necessary, Meg O'Neill, chief executive of energy firm Woodside, said at the Energy Intelligence Forum.
"If you look at the economic growth projections of China, South Asia and Southeast Asia that are likely to happen and the decarbonization objectives they have set, we absolutely believe LNG will be an important part of the mix," O'Neill said.
China, Southeast Asia, and south Asia will be the gas demand drivers in the coming decades, as the coal-to-gas switch will continue - albeit at a slower-paced rate - despite last year's drop in LNG imports in the region.
Energy importers in south and Southeast Asia, including India, Pakistan, Bangladesh, and Thailand, scaled back significantly LNG purchases last year and early this year due to the spiking spot prices in the energy crisis. Those importers were priced out of the spot LNG market in which Europe rushed to buy cargoes to replace the lost pipeline gas supply from Russia.
This year, the prices aren't nearly as high as they were last year, and some of the south Asian buyers are back on the spot market.
Meanwhile, China and Europe have hurried to sign long-term deals for LNG supply in recent months to capture part of the new supply that will come out of the United States and Qatar after 2025-2026. China has been seeking long-term supply for years, while Europe - previously reluctant to commit to such deals due to plans to reduce overall gas consumption - has just recently signed such agreements with QatarEnergy and with U.S. project developers and exporters.
Long-term LNG contracting for the U.S. developers has seen a flurry of deals in recent months, including from buyers in Europe, where energy security has taken center stage at the expense of concerns about emissions from natural gas imports.
Even if Europe's demand is unlikely to return to the pre-crisis days ever again, Asia will drive natural gas and LNG demand this decade and in the coming decades.
By Tsvetana Paraskova for Oilprice.com
Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More
Comments
The reason for the IEA’s failures is that its research is politically-motivated, bias and shallow. That is why OPEC has stopped four years ago to use any IEA energy data.
Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert
But think of all the CO2 they won't be emitting...