Unless reinvested, there will be a lack of gas in the market in the coming decades, which will directly hit the pockets of consumers. These are the conclusions of the latest report from the IGU (International Gas Union) association, titled Global gas report 2023, this week.
The verdict of the study invites reflection. It argues that the global supply of natural gas will fall in the coming decades without new investments, causing price shocks more severe and frequent than those experienced in the last two years.
The starting point is that the demand for gas as a bridge in the energy transition is destined to last. Increasing electrification and climate change make this fuel necessary. Just think about the increasingly intensive use of air conditioning systems with heat waves.
However, the problems will come from the gas supply side. Supply is expected to decline. The cause? The 58% cut in investment between 2014 and 2020.
It is true that since then the sector has returned to investing, but the different consumption forecasts in the coming decades, depending on the extent to which the objectives of the Paris Agreement are met, make it difficult to achieve balance. Rather we are going towards a lack. “The study shows how we must move towards a more gradual energy transition. Accelerating the phase out –progressive reduction– of fossils ahead of time can create imbalances, especially in the gas market, which consumers themselves will end up paying for,” warns professor of energy resources at the University of Barcelona Mariano Marzo.
“Restoring a sustainable balance in the global gas market is imperative and requires addressing the existing supply deficit,” insists the IGU in its study, prepared with the help of consultants Rystad Energy and gas network operator Snam. Investments are needed “to address the natural decline in supply, the dynamics of global demand and the likely growth in several regions.” Indeed, there are deposits close to exhaustion and gas production will decline. Thus, the current level of global gas production will reach 4 billion m3 in 2030, but will fall to just over one, 75% less, in 2050.
The sector is confident that there will be future discoveries that could partially offset these declines, but we are in the field of forecasts. If current demand trends continue, the lack of gas will begin to be noticeable at the end of this decade. Even in the hypothesis that consumption is significantly reduced, supply may still be insufficient. Li Yalan, president of the IGU, warned that “the current natural gas network will not meet most possible demand prospects.”
After the outbreak of the Ukrainian war in 2022, Europe has tried to reduce gas consumption (especially after the rise in prices). And it can be said that it has achieved this, with a decrease of 12%, also thanks to a milder winter than expected.
But the agreements signed with Qatar for the supply of liquefied gas (imports to Europe increased by 69%) reaffirm that Europeans are still betting on this fuel and that demand will remain robust. In fact, on a global scale, demand in 2022 only decreased by 1.5%. There is still a thirst for gas. Giving up on increasing production can have a very high cost.
Joan Batalla, president of the Spanish Gas Association, Sedigas, recalls that for companies to decide to invest "long-term contracts are required, so that there is a guarantee of return on the capital contributed." But that requires a time horizon that guarantees stability. “Decarbonization is confused with electrification. In reality, we must assume that in the best scenario there is 50% of energy production that cannot be electrified. And if there is no investment in production, the rigidity of supply will lead to strong price volatility.”
