BAKU, Azerbaijan, June 10
By Leman Zeynalova – Trend:
After a 4 percent drop in 2020, natural gas demand is expected to progressively recover in 2021 as consumption returns close to its pre-crisis level in mature markets, while emerging markets benefit from economic rebound and lower natural gas prices, Trend reports citing the International Energy Agency (IEA).
The impact of the 2020 crisis is, however, expected to have repercussions on the medium-term growth potential, resulting in about 75 bcm of lost growth over the forecast period, 2019 to 2025, reads the IEA report. “This forecast expects an average growth rate of 1.5 percent per year during this period.”
IEA believes that the Asia Pacific region accounts for over half of incremental global gas consumption in the coming years, driven principally by the development of gas in China and India.
“While the prospects of natural gas remain strong for these two markets, the outlook is highly dependent on China’s and India’s future policy direction and recovery path in the post-crisis environment. In spite of the current economic headwinds and uncertainty, natural gas still benefits from strong policy support in both countries, with ongoing reforms to increase the role of gas in the energy mix. Future growth in the industry sector, which constitutes the main driver of incremental gas demand in both countries, will however highly depend on the pace of economic recovery, both for domestic and export markets for industrial goods,” reads the report.
If almost all regions are expected to contribute to the growth in natural gas production in the next five years, half of the net increase in supply comes from North America and the Middle East, said the report.
“The US shale industry, the main driver of global gas output growth over the recent years, is particularly vulnerable in the current crisis context – the IEA report World Energy Investment 2020 estimates that upstream spending on shale tight oil and gas is set to decline by 50 percent y-o-y in 2020,” said IEA.
The agency believes that the sector’s ability to rebound in a post-crisis environment will be pivotal to deliver the incremental gas production needed by the US market to replace its declining conventional production and supply its additional LNG export capacity under development.
“Production growth in the Middle East is driven by the ramping up of large conventional projects in Saudi Arabia, Iran, Israel, Iraq and Qatar – for which the oil price collapse and uncertainty represent a substantial downside risk in the first years of the forecast. Gas production in Russia, the other large contributor to incremental supply, is almost entirely driven by export-oriented projects; while most of the additional production is expected for the second half of the forecast, shorter-term uncertainty on demand growth could negatively impact its development schedule,” said the IEA.
---
Follow the author on Twitter: @Lyaman_Zeyn