2020: Global gas demand to fall by 150bcm. – IEA
By Ikenna Omeje
International Energy Agency (IEA) has said Global gas demand is expected to fall by 150 billion cubic metres (bcm), representing 4 percent – twice the drop occasioned by the 2008 global financial crisis.
This was stated in its annual market report titled, “Gas 2020”. The global energy watchdog, said the fall is as a result of the impacts of the COVID-19 pandemic and an unusual winter in the northern hemisphere
“The combination of the Covid-19 crisis and an exceptionally mild winter in the northern hemisphere have put global demand for natural gas on course for its largest annual decline in history, the International Energy Agency said today in a new report. Global gas demand is expected to fall by 4%, or 150 billion cubic metres (bcm) – twice the size of the drop following the 2008 global financial crisis.” IEA said
The report also stated that as of early June, all major gas markets worldwide were experiencing falls in demand or slumps in growth. It noted that for the full year, more mature markets across Europe, North America and Asia are expected to witness biggest drops, accounting for 75 percent of the total decline in gas demand in 2020.
Remarking on the report, the Executive Director, IEA, Fatih Birol, said: “Natural gas has so far experienced a less severe impact than oil and coal, but it is far from immune from the current crisis. The record decline this year represents a dramatic change of circumstances for an industry that had become used to strong increases in demand.”
As a consequence of oversupply, natural gas indices have been pushed to record lows, couple with the fact that oil and gas companies are cutting spending and postponing investment decisions to make up for drop in revenue. Noting this, IEA said it expects slow recovery of prices after 2021.
“Global gas demand is expected to gradually recover in the next two years, but this does not mean it will quickly go back to business as usual,” Dr Birol said. “The Covid-19 crisis will have a lasting impact on future market developments, dampening growth rates and increasing uncertainties.”
The agency said that after 2021, expected demand will be led by China and Russia, with the industrial sector in both countries as the main source of demand growth, adding that the impact of Covid-19 crisis will result in 75 bcm of lost annual demand by 2025, which is the same amount as the increase in global demand in 2019.
“After 2021, most of the increase in demand takes place in emerging Asia, led by China and India where gas benefits from strong policy support. In both countries, the industrial sector is the main source of demand growth, making it highly dependent on the pace of the recovery in domestic and export markets for industrial goods. Repercussions from the Covid-19 crisis are set to result in 75 bcm of lost annual demand by 2025, which is the same amount as the increase in global demand in 2019.
“The main drivers of future supply growth – US shale and large conventional projects in the Middle East and Russia – are also under pressure from the current oil price collapse and uncertainty surrounding demand trends over the short and medium term.”
According to IEA, “Liquefied natural gas (LNG) is set to remain the main driver of the international gas trade. The wave of investment in LNG projects during 2018 and 2019 will bring additional export capacity in North America, Africa and Russia. Slower growth in global gas demand in the coming years is likely to result in capacity outpacing LNG imports through 2025, limiting the risk of a tight LNG market for the time being.
“New production and infrastructure projects are likely to come online amid growth trends that are markedly below earlier expectations, reinforcing the prospect of overcapacity and low prices. This casts a shadow over future investments, which will be needed in the long term to ensure the renewal of production sources and global security of supply.”