Global demand for natural gas this year will undergo the strongest decline in history. This forecast was made by the International Energy Agency (IEA). The fall will be 4%, or about 150 billion cubic meters, which is one and a half times higher than the consumption of a country like Germany. Demand will decline in all regions of the world without exception, but preliminary evidence shows that this process has affected Europe the most. The main hopes for the restoration of gas demand after the crisis lie, on the contrary, in Asia. However, the IEA believes that the industry will recover from the impact longer than the manufacturers would like.
Last year was not the best for gas workers. Consumption growth was lower than expected (+70 billion cubic meters), and the exceptionally warm winter further weakened demand. Since February, the situation began to deteriorate further. The epidemic and quarantine shocked all markets and gas did not become an exception. Suppliers had to face a double problem. First, quarantine in and of itself led to a decrease in gas consumption. Secondly, the world economy has suffered severe damage, the effect of which will last for many months, and maybe even years.
An overabundance of gas supply in the world market resulting from the commissioning of new LNG capacities in recent years against the backdrop of two warm winters in a row led to a drop in gas prices in spot markets in Asia and Europe
In Europe, this was compounded by high gas reserves at the beginning of the year. As a result, gas spot prices in Europe are now lower than in the US, which makes LNG exports from the US to Europe unprofitable, and the premium on Asian markets does not cover the cost of transporting LNG from the US to the region.
According to the IEA, problems of this nature will continue throughout 2020. More than half of the fall will be in the sphere of electricity generation, the housing and communal complex and industry in this regard will suffer less. At the same time, even in 2021, there is no need to wait for a quick recovery in the sector, most likely the growth will be smooth and gradual. In general, the 2020 crisis will lead to the fact that the average annual growth rate of gas consumption in the world until 2025 will slow down to 1.5% against 1.8% in the previous few years. In total, the market is missing about 75 billion cubic meters.
To restore balance in the global gas market, a significant reduction in production and the abandonment of new LNG projects are required. Moreover, the latter is already happening.
Some large companies are still optimistic about the long-term prospects of natural gas. So, the head of Shell Ben van Berden in an interview with Bloomberg said that natural gas will be the fastest growing type of fuel in terms of consumption. According to him, the annual increase in demand will be 4%. LNG consumption will increase even faster. If at the end of 2019 it amounted to 359 million tons, then in 20 years it will reach 700 million tons. The main hopes here are still laid on Asia, which should provide from half to two-thirds of the total rise.