Navigating the Shifting Tides
The recent Gas 2023 Medium-Term Market Report by the International Energy Agency (IEA) has brought some noteworthy changes to the table. First off, the report predicts a slowdown in the growth of global natural gas demand, marking a shift from the roaring expansion of the past decade. Between 2022 and 2026, we're looking at an average growth of 1.6% per year, down from the 2.5% we witnessed between 2017 and 2021 (IEA). Most would question why this is happening. It seems the global energy crisis sparked by Russia's invasion of Ukraine in 2022 has ushered in a new era, putting the brakes on the once-rapid growth of gas markets.
Protesters against the Russian invasion of Ukraine pass the Reichstag building (Foreign Policy)
Additionally, mature markets in Asia, Europe, and North America are expected to see a decline in gas demand. It's all for a greater cause – the accelerated adoption of renewables and improved energy efficiency. Europe, in particular, is dealing with the aftermath of losing piped gas from Russia, pushing governments to explore alternative energy solutions for maintaining security. However, the report highlights a silver lining: fast-growing Asian markets and some gas-rich economies in the Middle East and Africa are stepping up to the plate. China is set to lead the charge, accounting for nearly half of the global gas demand growth. Their industrial production, power sector, and urban areas are pushing strongly for that energy through gas.
A graphic from Forbes
But what about liquefied natural gas (LNG)? A 25% expansion in global LNG capacity is expected between 2022 and 2026 (IEA). The United States is taking the lead as the world's largest LNG exporter, giving the market a more globalized touch. This growth not only eases supply concerns but also adds a layer of resilience to the market, helping suppliers and consumers respond to unexpected shocks. However, the plot thickens as we consider the potential risks for this winter in the Northern Hemisphere. While gas prices have dipped, uncertainties linger, especially with tight supplies and the looming possibility of a cold winter. Europe's gas storage sites are at 96% capacity, but that doesn't necessarily guarantee stable prices.
A video of panelists (Columbia University) going through the Gas 2023 Medium-Term Market Report.
In the grand finale, the report also touches on the rising role of low-emission gasses. Brace yourselves for a more sustainable future – the supply of these gasses is set to double by 2026, with Europe and North America leading the charge. Policies, subsidies, and well-connected networks are driving this growth, but reaching ambitious targets for biomethane and low-emission hydrogen will require continued efforts.
As we go through the Gas 2023 report, it's clear that the global gas landscape is shifting. From declining demand in mature markets to the rise of LNG and the surge in low-emission gasses, the energy world continues to make progress in positive directions.
