International Energy Agency: Natural Gas Analysis and Outlook 2022-2025

The report believes that from the demand side, after experiencing an extraordinary demand recovery in 2021, the global natural gas demand growth rate is expected to turn negative in 2022 and will stagnate in the short term, with high uncertainty until 2025. As early as the second half of 2021, the international natural gas market had already formed a situation of high prices and supply tensions. The outbreak of the Russian-Ukrainian conflict on February 24, 2022 further frustrated the global natural gas market, and the spot prices of natural gas in Europe and Asia reached historical highs. In the first half of 2022, Europe's natural gas demand fell by more than 10% year-on-year. Affected by high temperatures and record high natural gas prices, natural gas use in the industrial and power sectors fell sharply, below its 2020 level. The potential interruption of Russian gas supply poses further downside risks. In the case of rising prices, the market demand for North American natural gas continues to grow, and the increase in US liquefied natural gas in the first half of 2022 accounts for nearly 90% of the total supply increase. The Asia-Pacific region will dominate demand growth, but tight supply will limit its growth pace. China’s natural gas growth will continue, driven by the industrial sector, but at a slower pace by 2025. Natural gas use in China’s power sector will stagnate between 2022 and 2025, driven by supply constraints and substitution effects from renewables.

The report believes that from the supply side, by 2025, global natural gas production will be concentrated in North America and the Middle East, but the growth will still be limited, while Russia's production potential will decline due to an expected decline in exports. According to the IEA forecast, during the period 2021-2025, Russia's pipeline gas exports to the EU will fall by about 55% in the base scenario, and the decline will further increase to 75% in the accelerated scenario.

In terms of trade volume, the average annual growth rate of global LNG trade will be slightly less than 4% during 2021-2025, approaching 600 billion cubic meters. The surge in demand for LNG in Europe and the significant slowdown in the growth of LNG liquefaction capacity will increase the risk of long-term tension in the global natural gas market. Expanding the scale of low-carbon natural gas production and methane emission reduction will help reduce emissions while easing supply pressure. At the roundtable discussion, experts believed that the EU's departure from Russian pipeline gas supply will have a long-term impact on global natural gas development, and there will be great market uncertainty in the future.

The report predicts that by 2025, global natural gas demand will grow by an average of 0.8% per year, which is significantly lower than the previous forecast of an average annual growth rate of 1.7% by 2024. Compared with last year, the reduction in natural gas demand brought about by renewable conversion and energy efficiency savings only accounts for 20%. Most of the reduction is due to the economic downturn, which has delayed the conversion of coal and oil to natural gas. Therefore, the IEA pointed out that in mature markets such as North America, Europe, and Eurasia, it is very important to formulate and implement further energy transformation policies to accelerate the decline in consumption. Emerging markets such as Asia will benefit from the decline in natural gas prices and the increase in supply brought about by these measures.

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