Natural gas demand in the form of LNG and pipeline gas is set to grow by 3.2 percent in 2021, propelled by increases in Asian countries, as well as in the Middle East and the Russian Federation and this is expected to boost global demand more than 1 percent above 2019 levels, according to the Global Energy Review for 2021 of the International Energy Agency.
In the United States, the world’s largest natural gas market, the annual
increase in demand is set to amount to less than 20 percent of the 20 billion cubic metres decline in 2020, squeezed by the continued growth of renewables and rising natural gas prices.
“Nearly three-quarters of the global demand growth in 2021 is from the
industrial and buildings sectors, while electricity generation from natural gas
remains below 2019 levels,” said the IEA report.
The IEA said its methodology included gas demand data collected for around two-thirds of global demand nations, including from the US, Indian, Chinese andSouth Korean governments, as well as oil and gas ministries and LNG import data as a proxy for gas demand in additional countries.
Global gas demand is expected to recover 3.2 percent in 2021, erasing the losses in 2020, and pushing demand 1.3 percent above 2019 levels.
“This recovery in gas demand has been driven mainly by fast-growing markets,primarily in Asia and to a lesser extent in the Middle East, and subject to uncertainties regarding the industrial rebound or fuel price competitiveness,” explained the IEA.
“Demand in the European Union is expected to rebound to levels on a par with 2019. Growth in the US is more gradual, with demand not expected to return to 2019 levels in 2021,” added the report. (Our photo shows the Zeebrugge LNG terminal in Belgium with wind power in the background.)
The IEA said rising natural gas prices have challenged the position of gas in electricity generation as seen in the US where demand in the first quarter of 2021 was lower than the first quarter of 2020.
“Across the year, higher gas prices are expected to keep gas demand in the United States close to 2020 levels and around 2 percent below 2019 levels,” added the report.
In the EU, higher carbon prices provide some support to gas in relation to coal.
Preliminary data for the first quarter shows an 8 percent year-on-year increase in gas demand in Europe.
The picture is very different across developing Asia, where demand in 2021 is expected to increase by 7 percent on 2020 levels, putting demand 8.5 percent above 2019 levels.
“China leads the increase, with 2021 demand more than 14 percent (or 44 Bcm) higher than 2019 levels,” said the IEA.
“The industry and buildings sectors are expected to lead gas demand growth in 2021, with industry demand increasing by almost 5 percent as global output and trade volumes recover,” added the report.
“China, India and other fast-growing Asian markets are driving this growth,” stated the IEA.
The France-based agency also made clear that global gas demand in 2021 remained subject to significant uncertainty regarding not only electricity demand and industrial production but also the price evolution of gas versuscoal in key markets such as the US, as well as in regards to the weather across the Northern Hemisphere towards the end of 2021.
In the outlook covering all major fuels, the IEA said global energy demand in 2020 fell by 4 percent, the largest decline since World War II and the largest ever absolute decline.
The latest statistical data for energy demand in the first quarter of 2021 highlighted the continued impacts of the Covid-19 pandemic on energy use.
“Building on Q1 data, projections for 2021 indicate that as Covid restrictions are lifted and economies recover, energy demand is expected to rebound by 4.6 percent,” said the IEA.
However, in 2021 the IEA expects recovering economic activity to reverse 2020’s decline in coal demand, with a 4.5 percent increase pushing global coal demand above 2019 levels.
“The power sector accounted for just over 40 percent of the drop in coal use in 2020, but the rapid increase in coal-fired generation in Asia sees it account for three-quarters of the rebound in 2021,” said the IEA.
“Gas prices are also expected to rise in 2021, leading to some switching back to coal, notably in the US and the EU,” it added.
The report explained that the growth of coal consumption in 2021 was a continuation of the rebound in global coal demand that began in the final quarter of 2020.
While an exceptional cold snap in December in Northeast Asia was partly to blame for increasing coal demand, the rapid growth of coal-fired electricity generation is a reminder of coal’s central role in fuelling some of the world’s largest economies.
The IEA said that the International Monetary Fund forecasts suggest rising energy demand from growth will help LNG and pipeline gas as well as other energy sources.
“While the global health crisis continues in the early months of 2021 with second and even third waves of the virus in many regions, accelerating vaccine roll-outs and major stimulus packages in many advanced economies have provided a beacon of hope,” stated the IEA Outlook.
“The IMF projects the global economy will grow by 6 percent in 2021, more than compensating for the 3.5 percent drop in 2020,” noted the IEA.
In the power market where LNG shipments are a growing presence, electricity demand is heading for its fastest growth in more than 10 years.
Electricity demand is due to increase by 4.5 percent in 2021, or over 1,000 terawatt hours.
“This is almost five times greater than the decline in 2020, cementing electricity's share in final energy demand above 20 percent.
“Almost 80 percent of the projected increase in demand in 2021 is in emerging market and developing economies, with China alone accounting for half of global growth.” stated the report.
The IEA said that renewables remained the success story of the Covid-19 era.
Demand for renewables grew by 3 percent in 2020 and is set to increase across all key sectors, power, heating, industry and transport in 2021.
The power sector leads the way, with its demand for renewables on course to expand by more than 8 percent, to reach 8,300 TWh, the largest year-on-year growth on record in absolute terms.
Renewables are set to provide more than half of the increase in global electricity supply in 2021. Solar and wind are expected to contribute two-thirds of renewable growth.
The share of renewables in global electricity generation is projected to increase to almost 30 percent in 2021, up from less than 27 percent in 2019.