Gas Market Report, Q3-2022
Abstract
Russia’s invasion of Ukraine has intensified the already tight supply of natural gas, pushing prices higher and leading to fuel switching and demand destruction. This report forecasts a decline in natural gas demand in 2022 and expects subdued growth up to 2025. Europe’s pursuit of liquefied natural gas (LNG) to replace Russian pipeline gas and limited global LNG export capacity add to market uncertainties. Faster implementation of clean energy policies in mature gas markets can ease price competition and help emerging markets access supplies that improve carbon intensity and air quality.
Key Findings
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Demand Forecast
- Short-Term Impact: Short-term gas demand growth has halted due to current market tensions and medium-term uncertainties.
- Long-Term Outlook: The forecast for average growth in gas demand to 2024 has been reduced by 60% compared to previous estimates.
- Regional Growth:
- Asia and Middle East: These regions account for about 80% of medium-term gas demand growth.
- Industrial Sector: The industrial sector is expected to account for over half of global gas consumption growth from 2022 to 2025.
- Non-Energy Uses: Gas demand for non-energy uses, particularly in the fertiliser industry, is expected to slow down.
- China: China’s gas consumption growth is expected to continue but at a lower pace in 2022-2025, driven primarily by industry rather than the power sector.
- India: India’s gas demand growth is expected to come mainly from industry and city gas segments, with domestic production providing most of the incremental supply.
- Emerging Asia: Despite strong fundamentals, emerging Asia faces challenges in LNG affordability.
- Japan and Korea: Both countries are expected to see a decline in gas demand due to a squeeze on gas in power generation.
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Supply Forecast
- North America and Middle East: These regions will lead in gas production growth, with North America focusing on production and the Middle East on LNG export.
- Russia: Russia’s export prospects are declining, leading to a steep downward revision in production outlook.
- South America: South American gas production is expected to increase but remain below pre-pandemic levels due to limited domestic demand and depletion in legacy producing countries.
Summary
The report highlights the significant impact of the Russia-Ukraine conflict on global natural gas markets, leading to reduced demand forecasts and increased uncertainties. The focus is on the role of gas in industrial sectors and the challenges faced by emerging markets in accessing affordable gas supplies. Cleaner energy policies in mature markets are recommended to mitigate price competition and improve environmental outcomes.