Key Takeaways
The IEA expects 2024 to mark a record year for world natural gas demand, driven largely by increasing demand in the Asia-Pacific region, and 2025 is expected to exceed that record.
Natural gas prices fluctuate wildly in world markets and ongoing geopolitical turmoil has ratcheted up risk factors.
The United States is pausing approval of new LNG projects under a Biden-Harris plan to study whether LNG exports are in the public interest.
The IEA expects 85 percent of new world gas supply to come from North America, mostly the United States, in 2025.
Contracts for Russian gas transited through Ukraine expire at the end of 2024, adding to tight supplies.
Absent new supplies of affordable gas, nations in need of affordable and reliable energy will revert to using more coal.
Global gas demand is set to hit a record high in 2024 and then again in 2025. The global gas balance, however, is “fragile” as limited LNG production growth keeps supply tight amid rising global demand, according to the International Energy Agency (IEA). In its annual Global Gas Security Review, the IEA noted that following the supply shocks of 2022-23, gas markets returned to more pronounced growth in 2024. Total gas demand is expected to grow by over 2.5 percent to a record high of 4,200 billion cubic meters this year, driven by growth in the Asia-Pacific region. Further causing problems is that geopolitical tensions are causing price volatility. Gas prices in Europe and Asia have remained volatile throughout 2024, reacting to events that could threaten supply, such as the Russian invasion of Ukraine and the turmoil in the Middle East.
On October 2, the benchmark Dutch month-ahead gas price was 38.65 euros per megawatt hour, which compares to 22.95 euros per megawatt hour on February 22, an increase of 68 percent, and a recent peak of 55.23 euros per megawatt hour on October 13, 2023, demonstrating volatility.
According to IEA’s preliminary data, gas consumption increased by 2.8 percent year-on-year in the first three quarters of 2024, well above the 2 percent average growth rate from 2010 to 2020, with Asian markets accounting for the majority of the growth. For 2024, global gas demand is forecast to grow by just over 100 billion cubic meters, with the Asia-Pacific region expected to account for nearly 45 percent of the incremental global gas demand. Industry and energy own use are the primary drivers and are projected to contribute more than half of the demand growth, partly supported by continued economic expansion in fast-growing Asian markets. Europe’s industrial gas demand is also adding to the record as it is recovering, although it remains well below pre-crisis levels, reflecting deindustrialization occurring in Germany and other nations there.
In 2025, global gas demand is forecast to increase by another 2.3 percent — or nearly 100 billion cubic meters, again driven by Asia, which is expected to account for over half of incremental gas demand.
On the supply side, global LNG growth is weak, increasing just 2 percent year on year in the first nine months of 2024, which is well below its 8 percent average annual growth rate between 2016 and 2020. Project delays and feed gas supply issues at certain legacy producers — including Angola, Egypt, and Trinidad and Tobago — have hindered LNG production growth. However, the expected start-ups of the Plaquemines LNG export terminal in the United States and Tortue FLNG off the coast of West Africa are anticipated to improve LNG supply availability in the 4th quarter. For the entire year, global LNG supply is expected to grow by 2 percent — its slowest growth rate since 2020.
In 2025, LNG supply growth is set to accelerate to nearly 6 percent as several large LNG projects come online. North America is expected to account for about 85 percent of global incremental LNG supply in 2025, with nearly three-quarters of these volumes coming from the United States. Continued LNG growth from the United States, however, is hampered by the Biden-Harris pause on new LNG permits. In January, the Biden-Harris Department of Energy halted its reviews of applications to export LNG to countries that lack free trade agreements with the United States, saying the agency needed time to update the economic and environmental studies it uses to decide whether approving additional exports is in the public interest. This includes Europe, which has been hit hard by gas disruptions relating to the Russia-Ukraine war. The pause has slowed progress on several major U.S. LNG projects and created uncertainty about the timing of final investment decisions, along with the longer-term global market share of U.S. supply. It has also shaken confidence that the United States is a reliable partner in energy security for other nations.
The IEA in its analysis on global gas supply and demand did not consider Russia’s Arctic LNG 2 project as a source of firm LNG supply due to sanctions. Further, according to the IEA, the future of Russian gas transit via Ukraine was a “key uncertainty” ahead of the 2024/25 winter, as both the transit and interconnection deals between Russia and Ukraine expire at the end of 2024. In 2023, Russian gas transit flows via Ukraine totaled 14.65 billion cubic meters of which some 12.8 billion cubic meters were sent to the European Union and an estimated 1.8 billion cubic meters went to Moldova. IEA’s forecast assumes no Russian piped gas deliveries via Ukraine to Europe from January 2025. Europe will need to rely more on its storage and on alternative supply — mostly LNG — increasing storage refill needs in the following summer. The loss of the transit would result in a loss of around 6 billion cubic meters of gas supply into the EU in the first quarter of 2025 and would necessitate higher European LNG imports, which would drive stronger competition with Asian buyers for flexible LNG cargoes and lead to tighter market fundamentals.
The Future Is Expected to be Worse for Natural Gas Supply
According to the International Gas Union’s Global Gas Report 2024, a Switzerland-based industry organization, the world will face a 20 percent shortfall in natural gas supply by the end of the decade if significant increases in supply and infrastructure are not achieved. If global demand for natural gas continues to rise as it did over the past four years, and production does not expand accordingly, a 22 percent global supply deficit is anticipated by 2030. This shortfall is attributed to the underestimation of rising global energy consumption in various net-zero carbon scenarios. It appears that recent increases in energy use, particularly from data centers and cooling, may not have been fully considered in the decarbonization models used by policymakers. Despite this outlook, the Biden-Harris administration remains committed to pausing domestic LNG infrastructure development as mentioned above, a stance supported by anti-fossil fuel energy groups. Paradoxically, making natural gas more difficult to produce, transport, and use simply induces the longer use of coal by many nations and their industries that need reliable and affordable energy.
Conclusion
Global natural gas demand is expected to reach a record this year and a new record next year. The global gas balance, however, is “fragile” as limited LNG production growth keeps supply tight amid rising global demand. The situation is exacerbated by the Biden-Harris pause on new LNG facilities, as the administration’s Department of Energy says it needs time to update the economic and environmental studies it uses to decide whether approving additional exports is in the public interest. The United States is the largest LNG exporter and natural gas producer, but further LNG investments require certainty of government policy, which has been shaken by the “pause.” The Daily Caller says that the pause may be a major act of deception because an independent group called Government Accountability and Oversight (GAO) reveals that the administration may have actually conducted — or started to conduct — such a review in 2023 before effectively burying it because it may have been producing a politically inconvenient conclusion. Our major allies in Europe may need the LNG that the Biden-Harris administration is withholding as they refill their storage units after this winter and in the future.
