Natural Gas Analysis and Prospects 2022-2025

On July 8, 2022, the International Energy Agency's Gas Analysis and Outlook 2022-2025 was released online in both Chinese and English. The event is co-organized by the International Energy Agency (IEA), the Energy Research Institute of Peking University (IEPKU) and the International Gas Union (IGU). Keisuke Sadamori, Director of the Energy Market and Safety Department of the International Energy Agency, and Li Yalan, President of the International Gas Union and chairman of Beijing Gas Group, delivered speeches respectively. Jean-Baptiste Dubreuil, senior gas analyst at the International Energy Agency, explains the report in detail. Then Yang Lei, deputy dean of the Energy Research Institute of Peking University, chaired the round table forum. Zheng Hongtao, President of ENN, Li Yao, CEO of Siya Energy, Chen Xiaobao, Senior Visiting Researcher at Oxford Institute for Energy Studies, and Jean-Baptiste, Senior Gas Analyst at the International Energy Agency Dubreuil, Zhu Xingshan, Distinguished Researcher at the Energy Research Institute of Peking University, and five other guests discussed the development of natural gas and electricity in China, the impact of short-term market fluctuations and long-term carbon neutrality goals on the natural gas industry, and the role of natural gas in the energy transition. Finally, Wang Jing, deputy Director of the Oil and Gas Department of the National Energy Administration, delivered the closing speech.

Key points of the IEA's Gas Analysis and Outlook 2022-2025 are now shared as follows:

The global gas growth rate will turn negative in 2022, with high uncertainty until 2025

From the demand side, after experiencing an extraordinary demand recovery in 2021, the growth rate of global gas demand 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 has formed high prices and supply tensions, and the outbreak of the Russia-Ukraine conflict on February 24, 2022 led to further setbacks in the global natural gas market, and the spot price of natural gas in Europe and Asia reached an all-time high. In the first half of 2022, gas demand in Europe 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 declined significantly, falling below their 2020 levels. Potential disruptions to Russian gas supply pose further downside risks. Demand for North American natural gas continues to grow amid rising prices, with US LNG additions accounting for nearly 90% of total supply increases in the first half of 2022. The Asia Pacific region will dominate demand growth, but tight supply will limit its pace of growth. Driven by the industrial sector, China's gas growth will continue, but at a slower pace through 2025. Natural gas use in China's power sector will stagnate in 2022-2025 due to supply constraints and substitution effects from renewables.

At the roundtable discussion, experts expressed different views on the development of gas and electricity in China, believing that although there is no clear policy support for the development of gas and electricity due to natural gas price and supply considerations, under the constraints of environmental protection requirements and dual carbon targets, gas and electricity will be further developed from the 14th Five-Year Plan of coastal cities and the installed capacity of new gas and electricity.

Global gas production growth will be concentrated in North America and the Middle East, with trade reaching about 600 billion cubic meters in 2025

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

In terms of trade volume, the annual average growth rate of global LNG trade during 2021-2025 will be slightly less than 4%, close to 600 billion cubic meters. Surging demand for LNG in Europe and a significant slowdown in LNG liquefaction capacity growth will raise the risk of prolonged tightness in the global gas market. Scaling up low-carbon natural gas production and methane abatement could help reduce emissions while easing supply pressures. At the roundtable discussion, the experts believed that the EU's removal of Russian pipeline gas supply will have a long-term impact on global gas development, and the future market is uncertain.

Slower growth in gas demand does not mean faster energy transition

The report predicts that global gas demand will grow at an average annual rate of 0.8% through 2025, a marked reduction from the previous forecast of 1.7% growth through 2024. Renewable conversions and energy efficiency savings accounted for only 20 percent of the reduction in gas demand compared to last year. Most of the reduction was due to the economic downturn, which delayed the conversion of coal and oil to natural gas. In mature markets such as North America, Europe and Eurasia, it is important to develop and implement further energy transition policies to accelerate the decline in consumption. Emerging markets such as Asia will benefit from lower gas prices and higher supplies as a result of these moves.