Natural gas demand rises in 2024 while supply challenges persist: IEA
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Natural gas demand rises in 2024, but supply challenges persist: IEA

Natural gas demand rises in 2024, but supply challenges persist: IEA

Global gas demand is forecast to rise by more than 2.5 per cent in 2024, with similar growth expected in 2025, according to IEA’s latest report

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Natural gas demand rises in 2024, but supply challenges persist: IEA

Global natural gas demand is rebounding in 2024, following the chaos of the previous two years triggered by the global energy crisis.

According to the latest International Energy Agency (IEA) Global Gas Security Review, demand is forecast to rise by over 2.5 per cent in 2024, with similar growth expected in 2025.

However, the report highlights that new gas supplies are limited, and geopolitical uncertainties could keep global gas markets in a precarious state.

Rising demand for natural gas

Global demand for natural gas is growing faster than it has in recent years. The IEA attributes this surge to two primary factors: fast-growing demand in Asian markets and a rebound in Europe’s industrial gas demand.

However, even with the rebound, Europe’s demand remains significantly below pre-crisis levels.

As global economies recover from the impacts of the energy crisis, gas is seen as a crucial component for powering industries and homes alike.

In Asia, countries such as China and India are leading the charge in increasing their natural gas consumption, driven by economic growth and a shift towards cleaner energy alternatives. Meanwhile, Europe is experiencing a slower recovery in gas demand for industrial purposes but is still a major player in the global gas market.

Keisuke Sadamori, IEA’s director of Energy Markets and Security, explained, “The growth we’re seeing in global gas demand this year and next reflects the gradual recovery from a global energy crisis that hit markets hard.” However, he also cautioned that the balance between supply and demand remains fragile, leaving the global market vulnerable to volatility.

Limited supply growth as LNG takes centre stage

Despite rising demand,  LNG (liquefied natural gas) supply growth is not keeping pace. The IEA points to slow growth in LNG production as a key factor contributing to potential supply tightness soon. The LNG market has become crucial in balancing global gas supply and demand, particularly as traditional piped gas routes face disruptions due to geopolitical tensions and infrastructural challenges.

While new LNG projects are expected to come online in 2025 — mainly in North America, with additional volumes from Africa and Asia — the supply growth for 2024 remains limited.

Some key constraints, such as bottlenecks across the Panama Canal and the Red Sea, continue to impact global LNG shipping.

These challenges haven’t caused a significant reduction in LNG supply so far, but they underscore the vulnerabilities in an increasingly interconnected global gas market.

One of the biggest uncertainties in the global gas market heading into 2025 is the fate of Russian gas transiting via Ukraine.

Current contracts are set to expire at the end of 2024, raising concerns about the potential end of piped gas deliveries to Europe through Ukraine. If Russian gas flows are disrupted, Europe will have to rely more heavily on LNG imports, leading to a tighter global gas balance.

This shift would further strain an already fragile market, especially during the  2024-25 Northern Hemisphere winter, when demand typically peaks.

As European countries look to mitigate these risks, the IEA recommends strengthening flexibility mechanisms across gas and LNG value chains to enhance market liquidity and boost the security of supply.

Low-emissions gases and system integration

In this year’s report, the IEA also explores new possibilities for integrating low-emissions gases into the global energy mix.

The focus on the transport sector highlights the need for sustainable fuels to help reduce global carbon emissions. As part of its Low-Emissions Gases Work Programme, the IEA is investigating how cleaner gases, including hydrogen and biogas, can be incorporated into existing gas infrastructure.

These low-emissions gases could play a critical role in decarbonizing sectors that are hard to electrify, such as heavy transportation and industry. However, the transition to low-emissions gases is not without its challenges.

Governments and industry players will need to work together to improve infrastructure, regulatory frameworks, and market integration to enable this shift.

Collaborative approach needed for a secure gas future

The IEA’s report emphasises that producers and consumers must work in close collaboration to ensure gas market security. As gas prices remain volatile and supply risks loom, global stakeholders must focus on improving cooperation and resilience in the market.

Since the establishment of its Task Force on Gas and Clean Fuels Market Monitoring’ in 2022, the IEA has been working with governments around the world to monitor market developments and support the security of supply. The Task Force also played an active role in the  13th LNG Producer-Consumer Conference, which was co-organised with Japan’s  Ministry of Economy, Trade, and Industry earlier this year.

The IEA urges all parties involved to consider flexible frameworks for gas reserves, better integration of gas storage systems, and the optimisation of LNG supply routes to ensure a more resilient global gas market.

A fragile yet recovering market

While global gas demand is poised to increase significantly in the coming years, the market remains sensitive to unexpected developments, both on the supply and demand sides.

The growth in LNG production expected in 2025 may alleviate some of the strain on global gas supplies, but geopolitical tensions and transit risks could continue to drive price volatility.

As the world moves towards cleaner energy solutions, the role of natural gas as a transition fuel remains critical. However, navigating this delicate balance between the security of supply and advancing the transition to low-carbon energy sources will require continued international collaboration and innovative solutions.

 

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