Lower gas prices have pushed up gas use in the US power sector to an all-time high while China and India spur a demand rebound in Asia – though growth is capped by a limited rise in LNG supply, the International Energy Agency (IEA) finds. In 2024, global gas demand could expand by 2.5 percent, or 100 bcm – driven by Asia – while gas-burn in Europe falls further.
Strengthening industrial activity and the power sector were the key drivers behind gas demand growth in 2023: In the United States, gas-burn for generating electricity reached an all-time high of 42 percent, supported by low prices, as domestic gas output rose by 4 percent to an all-time high of 1,065 bcm. Ample domestic gas supply also allowed US exporters to step up LNG shipments by 10 percent, though permitting and build-out of key liquefaction capacity is now on hold.
Over in Asia Pacific, overall gas demand rebounded by an estimated 2.5 percent as regional powerhouses recover from the pandemic and subsequent economic decline. China’s gas demand, for once, jumped by 7 percent or 26 bcm last year on the back of higher gas use from power generators and industry which pushed up LNG inflows by a substantial 14 percent, or 12 bcm – though analysts pointed out this is still below 2021-highs. India’s gas consumption recovered as well while demand in the region’s mature markets, Japan and South Korea, fell amid improving availability of nuclear power stations and lower overall electricity use.
Slump in Europe’s gas-burn
Expanding demand in North America and Asia was, however, partly offset OECD Europe where gas demand fell by 7 percent (or 35 bcm) in 2023 to its lowest level since 1995. Industrial gas demand started to recover in the second half of 2023, albeit slowly, and still remains well below its pre-pandemic level. LNG shipments to Europe declined marginally – following a 60 percent surge in 2022 – as lower demand and high storage levels reduced buyers’ need to snap up often high-priced LNG cargoes starting from last summer.
Looking ahead, IEA analysts expect European gas demand to grow by 3 percent this year but remain nearly 20 percent below its 2021-levels. Though industrial gas use is set to recover eventually, the use of gas-fired power generation will keep falling as renewables paired with energy storage become increasingly cost competitive. In contrast, gas demand in Asia Pacific is expected to expand by close to 4 percent supported by both industrial activity and coal-to-gas switching in the power sector.
