IEA (2021), Gas Market Report, Q3-2021, IEA, Paris https://www.iea.org/reports/gas-market-report-q3-2021, Licence: CC BY 4.0
Global natural gas demand dropped by 1.9%, or 75 bcm, in 2020 because of an exceptionally mild winter in the northern hemisphere and the impact of the Covid-19 pandemic. We forecast global demand to rebound by 3.6% in 2021. And unless major policy changes to curb global gas consumption are introduced, demand is set to keep growing in the coming years, albeit at a slower pace, to reach nearly 4 300 bcm by 2024, a 7% rise from pre-Covid levels.
Gas demand growth is set to slow despite coal-to-gas switching, but more ambitious policies are needed to shift to a net zero path
Almost half of the increase in gas demand to 2024 is expected to come from the Asia Pacific region, driven by China and India as well as by emerging markets in South and Southeast Asia. The industrial sector plays a pivotal role in medium-term gas demand growth, accounting for about 40% of the total increase between 2020 and 2024 in our forecast. This includes the use of gas for industrial processes and as a feedstock for chemicals and fertilisers.
Natural gas demand is set to grow by 350 bcm between 2020 and 2024. This would have been 80 bcm higher were it not for energy efficiency improvements and measures to replace gas with other fuels. Of the 430 bcm increase that can be considered as “gross gas demand additions” over the period, growth driven by higher economic activity can explain almost two-thirds (270 bcm), while the substitution of coal (and oil to a lesser extent) explains the rest (160 bcm). Strong natural gas demand growth in 2021 is mostly the result of the global economic recovery from the Covid-19 crisis. Growth in 2022-2024 is driven in equal proportions by economic activity and fuel substitution.
In spite of this limited medium-term growth, our forecast for global gas demand in 2024 is above what is called for in the IEA’s climate-driven scenarios, notably in the recent special report Net Zero by 2050: A Roadmap for the Global Energy Sector. To get on track for the emissions pathway set out in the Roadmap, stronger policies would need to be introduced within our forecast period to underpin further fuel substitution and efficiency gains. This is especially the case in more mature markets, where much of the potential for switching from coal and oil to gas has already been tapped. Strong and early policy actions and investment are required, with impacts on gas demand that would commence during our forecast period and intensify significantly over the course of the 2020s. Switching from oil and coal to gas, particularly in emerging and developing economies, can reduce emissions and improve air quality, and already explains half of gas consumption growth in these markets in the 2022-2024 period.
Projects already under development meet most supply needs, and the focus on cleaner gas supply is growing
Global gas production in 2024 is expected to be 6% higher than 2019’s pre-Covid levels. This additional supply comes almost exclusively from large conventional assets already under development, mainly in Russia and the Middle East. It is supplemented by new investment in US shale gas production to keep pace with expanding LNG export capacity. However, without strong policy measures to curb longer-term gas demand growth, market volatility and concerns over security of supply may arise in the last years of our forecast.
To reduce its emissions footprint and align with net-zero emissions objectives, the gas industry needs to continue reducing the intensity of its greenhouse gas emissions along the value chain, support the development of low-carbon gases and develop carbon management solutions to minimise emissions from combustion. Reducing methane emissions is an efficient way – in terms of both time and cost – of narrowing the industry’s footprint. Analysis from the IEA Methane Tracker shows as much as 40% of current methane emissions could be avoided at no net cost. The transition to low-carbon sources of gas supply – such as biomethane, hydrogen and synthetic methane – requires the adjustment of regulations and infrastructure to ensure their cost-competitive integration into future energy systems. This report reviews recent market and policy developments supporting such a transition to cleaner gases.