The International Energy Agency says high prices for natural gas and supply fears due to the war in Ukraine will slow the growth in demand for fossil fuel in the coming years.
In a report published Tuesday, the Paris-based agency forecast global demand for natural gas will rise by 140 billion cubic meters between 2021 and 2025. That's less than half the increase of 370 bcm seen in the previous five-year period, which included the pandemic downturn.
The revised forecast is mostly due to expectations of slower economic growth rather than buyers switching from gas to coal, oil or renewable energy. While the burning of gas emits less planet-warming carbon dioxide than other fossil fuels, methane released during the extraction process is a significant driver of climate change.
“Russia's unprovoked war in Ukraine is seriously disrupting gas markets that were already showing signs of tightness,” said Keisuke Sadamori, the agency's director of energy markets and security.
Efforts by European Union countries to wean themselves off Russian gas will lead to a fall in pipeline exports from Russia to the 27-nation bloc of 55-75 per cent, the IEA said. At the same time, the EU's purchases of liquefied natural gas have diverted deliveries intended for other regions, such as Asia, which is predicted to account for half the demand growth by 2025.
“We are now seeing inevitable price spikes as countries around the world compete for LNG shipments, but the most sustainable response to today's global energy crisis is stronger efforts and policies to use energy more efficiently and to accelerate clean energy transitions,” said Sadamori.
The agency's quarterly report said capacity is partly constrained by a slump in gas infrastructure investments in the mid-2010s and pandemic-related construction delays. Recent new investments are not likely to affect gas supplies until after 2025, it said.