The EUGAL pipeline in Germany, the onshore extension of the Nord Stream 2 gas pipeline, can now move up to 55 billion cubic metres of natural gas per year. / gasnews.eu

The April Gas Market Report of the International Energy Agency shows that demand for natural gas should increase by 3.2% compared to 2020. According to the agency, achieving such an increase would mean more than replacing the decline in demand last year.

According to the IEA, the increase in demand is due to the interplay of several factors. At the beginning of the year, very cold temperatures, especially in Northeast Asia and North America, had a significant impact on natural gas demand. A period of cold weather in January, together with limited LNG supply availability and logistical constraints on LNG transportation, led to local fuel shortages and an unprecedented surge in spot LNG prices in China, South Korea and Japan.

During that period, Europe played an important balancing role. Unlike the first half of last year, when Europe was absorbing LNG surpluses, the growing gap between European and Asian prices led to a diversion of LNG supplies to Asia. LNG imports fell by 40% between mid-December and mid-January. This decline was offset by an increase in pipeline and storage imports.

In contrast, Canada, the US and Mexico were particularly cold in February. In addition, rising demand for gas resulted in a decline in gas production due to the freezing of many wells. Although these winter storms contributed to some increase in heating demand, according to the IEA, they are not that significant for the changing the annual natural gas consumption forecast. For example, natural gas consumption in the US this winter remained below last winter’s level despite the frost in February.

According to the agency, global gas demand could increase by as much as 3.2% compared to last year, and this year’s increase could completely replace last year’s decline in consumption.

According to the IEA, last year global natural gas consumption fell by 75 billion cubic metres (bcm), or 1.9%, compared to 2019. This is the largest drop in global consumption ever recorded, but in a year-on-year comparison it is comparable with the fall in 2009.

One reason why the decline in consumption has not been more pronounced is that low gas prices have improved the competitiveness of gas resources and led to greater use of gas for electricity and heat generation. According to the agency, replacing coal with natural gas reduced CO2 emissions by 58 million tonnes in 2020.

However, in its analysis, the agency stresses that achieving the projected increase will largely depend on economic recovery and other factors. Most of the expected growth is expected to take place in Asia and other fast-growing markets. On the contrary, for developed markets, the IEA foresees a more gradual recovery, and in some even remaining below 2019 levels.

By Martin Chomsky (photo: EUGAL)