EEurope’s shift away from pipeline gas from Russia and efforts towards liquefied natural gas (LNG) from countries like Qatar may be geopolitically imperative. In poorer regions of the world, however, this threatens to exacerbate the already strained energy supply. In the past, natural gas was considered a reliable and affordable source of energy that would play an increasing role in meeting rising energy demand. However, the global supply of LNG can hardly be increased in the short term. This is what the International Energy Agency wrote in its gas market report published on Tuesday.
“Europe’s rising demand for LNG to replace Russia’s pipeline gas supply has created an exceptionally tight global market,” it said. Record high European gas prices have made the continent a “premium market” for LNG, attracting supplies from other regions but causing supply shortages and “destroying” demand in other markets. Europe’s LNG demand will exceed supply growth this year, the Energy Agency estimates, and account for more than 60 percent of net growth in global LNG trade by 2025.
Supply hardly grows
Anyone who believes that the flourishing demand for liquid gas will lead to a sharp increase in supply, at least in the coming years, is also wrong. Rather, the expansion of LNG liquefaction capacity should initially “slow down significantly”, according to the Energy Agency report. The reason is a combination of restricted investment decisions during the period of lower oil and gas prices in the mid-2010s and corona-related construction delays.
Southeast Asia is one of the victims. Rising LNG prices have already led to periodic gas shortages, power outages, a fuel switch away from gas and a drop in demand in certain sectors in recent months, the experts at the Energy Agency continue to write. Nevertheless, the high dependency of the Asian emerging countries on LNG will even increase: Countries like Vietnam or the Philippines have not yet signed any long-term contracts and will therefore have to compete with Europe and Northeast Asia for short-term LNG supplies in the coming years.
Instead of simply replacing Russian gas with gas from other countries, the Energy Agency believes that Europe should push ahead with the energy transition and thus accelerate the move away from natural gas. That would ease the pressure on its world market price, give “price-sensitive emerging economies” easier access to supplies, and phase out coal-firing sooner in such regions. As a result, the CO would decrease2emissions and improved air quality.
