Global gas market remains unstable: IGU
Although it experienced its most turbulent year in its history in 2022 and came out of that volatility more agile and adaptable than ever, the global gas market remains in an unstable equilibrium in 2023, the International Gas Union (IGU) reported October 19 in its Global Gas Report 2023.
The report, released by the IGU, Italian energy infrastructure company Snam and knowledge partner Rystad Energy at the Energy Intelligence Forum in London, says underinvestment in natural gas, low-carbon and renewable gases have left the global gas market undersupplied and “highly sensitive” to fluctuations in both supply and demand.
In the wake of Russia’s invasion of Ukraine in early 2022, supply and price shocks reverberated throughout the industry, contributing to a 1.5% decline in global gas demand in 2022 compared to 2021. Europe and Asia experienced the largest declines, offset in part by strong demand growth in North America.
European demand fell by almost 12% in 2022, while spiking international LNG prices caused Asian demand to fall by 1.9%, with accompanying demand destruction in Southeast Asia as unaffordable LNG prices led to shortages and blackouts.
“As part of a more and more interconnected global market, the European gas system managed to overcome the enormous challenges faced in 2022, also thanks to the flexibility provided by LNG and the further diversification of gas supplies, which brought storages almost at full capacity ahead of the winter season,” Snam CEO Stefano Venier said. “It is important to continue investing in gas infrastructure to secure reliable and affordable natural gas supply and accelerate the development of green, low-carbon gas and CCS, considering the key role that molecules will play in the energy mix of the near and longer future.”
Alongside weaker demand in 2022, global gas production remained flat, with only a marginal 8.3bn m3 – or less than 0.5% – increase, the IGU said.
The curtailment of Russia’s output as European markets banned imports after the invasion of Ukraine was offset by supply growth in North America, the Middle East, Europe and Asia, and while prices remain above pre-Covid and pre-energy crisis levels in the second half this year, prices have cooled from record-breaking highs seen in 2022.
Subsequent demand contraction, marginal supply growth, and infrastructure debottlenecking helped the market ease into a fragile, unstable equilibrium, the report shows.
“The energy crisis reminded the world that only when energy is affordable and secure can it become truly sustainable,” IGU president Madam Li Yalan said. “It is clear, to build sustainable and affordable energy systems for all, gas investments are urgently needed alongside more renewables.”