In 2020, global gas demand may show a record decline for the entire observation period and fall by 4% or 150 billion cubic meters. Such a forecast on Wednesday, June 10, was published by the International Energy Agency (IEA).
“The annual decline in consumption will be the largest since the formation of the natural gas market in the second half of the 20th century. The collapse will double the recession in 2009, when demand for natural gas fell by 2%, ”the organization’s report said.
According to the IEA, a decrease in demand will occur in most regions of the world. First of all, we are talking about developed markets in Europe, North America, Asia and Eurasia, which account for 75% of global gas consumption.
In many ways, the negative dynamics is associated with the consequences of the coronavirus pandemic. The introduction of strict quarantine restrictions around the world has led to a decrease in business activity, the closure of a number of enterprises and a reduction in transportation. As a result, the consumption of all types of fuel, including gas, decreased. About this RT told the head of the analytical department of AMarkets Artyom Deev.
“The global economy was actually paused, which negatively affected the entire energy market. Moreover, if oil prices fell to negative values in the spring, the gas market managed to avoid this scenario due to relatively stable demand. Now the negative trend has shifted to the gas market, since the transport sector and the industrial sector, which account for up to 25-30% of the total demand for this type of fuel, have seriously suffered from the pandemic, ”said Deev.
In addition, RT analysts interviewed connect the observed collapse in gas demand with a rather warm winter. According to Mark Goichmann, the chief analyst of TeleTrade, at the end of 2019, an unfavorable temperature regime for fuel suppliers was established in the northern hemisphere.
“Warm winter has reduced the demand for gas from heat and power generation. Moreover, ordinary gas consumers who use it to heat homes have also reduced their consumption due to the freezing temperatures, ”said Goichmann in a conversation with RT.
Meanwhile, according to the IEA, already in 2021, global gas demand will recover and exceed the pre-crisis level. Until 2025, its annual consumption will grow by an average of 1.5%.
The main driver of increasing demand will be industry, which will provide up to 40% of additional gas consumption. According to Mark Goikhman, in many ways this situation will be associated with the gradual abandonment of production from the use of coal.
“Against the backdrop of declining gas prices, countries with developing economies will be quicker to abandon“ dirty ”coal from an environmental point of view. As a result, the recovery of gas demand will occur primarily in India, the countries of the Asia-Pacific region and China. Moreover, it is expected that China will demonstrate a record increase in gas consumption by almost 130 billion cubic meters per year, ”the analyst added.
Gas giant
According to the IEA forecast, in the current conditions until 2025, Russia will be able to significantly strengthen its position as one of the main exporters of gas in the global market. According to the agency, from 2019 to 2025, the country will account for about 20% of the growth in global gas supplies.
“Largely thanks to export projects, gas production will grow by 1.7% annually, further strengthening Russia’s position among the largest gas exporters in the world,” the agency said.
According to Konstantin Karpov, an expert on BCS Broker stock market, the main driver for gas production in Russia will be eastbound projects, the main one being the Power of Siberia gas pipeline. According to the expert, the design capacity of the pipeline allows exporting about 38 billion cubic meters of gas per year to the Asian market.
“In the coming years, this project will account for up to 20% of Russian gas exports. Moreover, the design of the Power of Siberia-2 gas pipeline has already begun, which could become the basis of a new export channel through Mongolia to China with a capacity of up to 50 billion cubic meters. Also, until 2024, the first two production lines of the Arctic LNG - 2 project are expected to be launched with a combined capacity of about 25 million tons of liquefied natural gas per year. These projects will allow Russia to thoroughly gain a foothold in the eastern markets, ”said Karpov.
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At the same time, the Nord Stream-2 pipeline, after the expected launch, could become the main source of gas for the EU countries, Mark Goikhman believes. According to him, the design capacity of the pipeline will be 55 billion cubic meters, which will reduce the US share in the European market.
“The United States sees Europe as the main marketplace for its liquefied natural gas. If Nord Stream-2 is completed in the coming months and starts deliveries to the EU, this will fundamentally strengthen Russia's position in this area and strike a blow to US dominance in the gas sector. Without a large sales market, American companies will be forced to reduce production, ”said the expert.
According to the IEA, to date, the United States remains the world leader in gas production. Meanwhile, until 2025, US gas production will grow more slowly than in Russia, increasing annually by 1.2%. Moreover, over the next few years, the figure may further decrease due to the nature of the work of gas producers in the United States. This point of view in an interview with RT was expressed by the expert of the Academy of Finance and Investment Management Gennady Nikolaev.
“American plants are not engaged in self-supply of gas, but lease capacity to intermediaries. If the period of low prices drags on, suppliers will stop cooperating. That is why Washington seeks to secure a market place for its companies, mainly due to pressure on European partners. With fair competition, they are much less likely to do so due to the more expensive cost of gas. Such a situation may allow Russia in the future to gain a leading position in the market, ”concluded Nikolaev.