The world wants natural gas

The International Energy Agency (IEA) has presented its annual outlook for global natural gas supply. According to the Paris-based organization, demand for gas is expected to rise by more than 2.5 percent this year, with similar growth expected in 2025. The conclusion of the Global Gas Security Review 2024: “Global gas demand is expected to reach new highs in 2024 and 2025.” 
“The growth reflects the gradual recovery from a global energy crisis that has hit markets hard,” said Keisuke Sadamori, Director of Energy Markets and Security at the IEA. However, the markets are still unsettled. They react sensitively to unexpected changes on both the supply and demand side. 
In the wake of the gas crisis, the importance of liquefied natural gas (LNG) has increased, although this substance and its transportation are not free of complications. Logistical bottlenecks, particularly in the Panama Canal and the Red Sea, continue to affect shipping. Although this has not yet resulted in a noticeable reduction in LNG supply, “it does highlight the potential vulnerabilities of the LNG trade in an increasingly interconnected global gas market”, according to the IEA. 

Moderate growth in LNG supply
Growth in global LNG supply remained moderate in the first nine months of this year, increasing by 2 percent or 7 billion cubic meters compared to the same period last year. This is well below the average annual growth rate of 8 percent between 2016 and 2020. Project delays and problems with natural gas production in some LNG producers such as Angola, Egypt and Trinidad and Tobago have curbed the growth in LNG production. 
However, growth in LNG supply is expected to accelerate to just under 6 percent in 2025. The commissioning of the Plaquemines LNG export terminal in the USA and the Tortue LNG terminal off the coast of West Africa in Q4 2024 should improve supply. In contrast, the Russian Arctic LNG 2 project is “not seen as a source of secure LNG supply” in the current forecast due to the broader sanctions environment. 
Trend towards long-term contracts
A look at LNG supply contracts reveals a trend towards long-term contracts with a fixed destination. “Contracts with a term of at least ten years currently account for 85 percent of the contractually agreed volumes. Contracts with a fixed destination are increasing and account for more than 70 percent of contracted volumes.” The gas shock of the past few years would have encouraged both buyers and sellers to conclude long-term contracts again. 
The greatest risk for the upcoming winter months is the transit of Russian natural gas through Ukraine, as existing contracts expire at the end of 2024. “This could mean the end of all gas supplies from Russia to Europe via Ukraine.” In such a scenario, higher LNG imports to Europe would be required in 2025, leading to an overall tighter global gas balance compared to continued transit via Ukraine. 
To overcome these challenges, the IEA recommends, among other things, strengthening flexibility mechanisms along the gas and LNG value chains, increasing liquidity in the global LNG market, integrating the Ukrainian gas storage system into the global gas market and examining potential framework conditions for voluntary gas reserve mechanisms. 
The IEA also assumes that natural gas will become increasingly important in the transport sector. Low-emission gases could play an important role in the decarbonization of heavy-duty transport over long distances, “as electrification has progressed more slowly here compared to light commercial vehicles.” The transportation sector is likely to be an important driver of rising demand in the medium term. The report therefore places particular emphasis on the use of low-emission gases in the transportation sector.