Demand for natural gas to slow down till post-pandemic
The world’s consumption of natural gas is set to decline by four percent this year, but global demand will return to growth after the pandemic, thanks to low natural gas prices and stricter environmental policies, a new report has shown.
The Global Gas Report 2020 – published by the International Gas Union (IGU), research company BloombergNEF (BNEF), and Italian gas infrastructure firm, Snam, said the trend of increased natural gas demand due to environmental concerns, which was already underway before the pandemic, will continue after COVID-19 is under control.
Earlier, an analysis of S&P Global Platts Analytics data showed that exports of LNG from West Africa’s four producers have shown some resilience, despite economic turmoil triggered by the coronavirus pandemic.
Total LNG exports from the four exporting countries in the region – Nigeria, Angola, Equatorial Guinea and Cameroon, so far this year are broadly in line with volumes supplied in the same time frame last year, the data show.
That is despite sharp falls in LNG utilization rates in other parts of the world, particularly in the US, while spot-exposed Egypt has halted LNG exports altogether.
Nigeria is exposed to the spot market with around 50% of its LNG exports last year sold on a spot or short-term basis, according to industry group GIIGNL.
But Nigeria’s LNG exports in 2020, have stayed strong despite weaker demand and low prices, with some 11 billion cubic meters (Bcm) exported in the first five months of the year.
Although some loaded cargoes had taken longer to reach their destinations, while others have been idling at sea in recent weeks, but exports continued out of the country’s only LNG plant, the 22 million mt/year Nigeria LNG facility.
During a webinar on the country’s petroleum sector in June, the National Nigerian Petroleum Corporation (NNPC) Group Managing Director, Mele Kyari, said a shortage of gas had made it difficult for the country to make use of its installed capacity.
As of January 2020, Nigeria’s gas reserves stood at 203.16 trillion ft3, representing a marginal increase of 1.16 trillion ft3 from the 202 trillion ft3 recorded in 2019.
The International Energy Agency (IEA), also sees global natural gas demand dropping by four percent in 2020, which would be the largest demand shock for gas markets in recorded history, with consumption expected to drop by twice the amount it did after the 2008 financial crisis.
The cost-competitiveness of natural gas and the increased access to gas in developing countries are set to be the key drivers of higher gas demand in the medium term, especially for liquefied natural gas (LNG), the Global Gas Report 2020 found.
Global LNG imports could return to their 2019 level quickly, as soon as in 2021, depending on the persistence and longevity of the pandemic.
“The pandemic has created disruption in the global energy sector, but low gas prices will ultimately stimulate demand growth as the economy recovers. We have already seen unprecedented coal-to-gas switching in Europe, and clean air policies in major growth markets such as India and China will drive more gas adoption in the next few years,” said Ashish Sethia, global head of commodities at BNEF.
For the longer term, however, low-carbon gas technologies would be needed, but they will depend on significant investments and policy actions, the report said.
“It is increasingly clear that the goals of the Paris Agreement cannot be met without a substantial scale-up of clean gas technologies – such as hydrogen,” Jon Moore, CEO of BNEF, said.
“While the economics are challenging today, a joined-up policy approach could unleash the investment needed to bring costs down, develop scalable business models and drive adoption across the hard-to-abate sectors.”