Russia-Ukraine conflict likely to slow down global natural gas demand

Geopolitical turmoil could lead to a decline in the use of natural gas for meeting energy demand in the coming years. Russia’s invasion of Ukraine has led to high prices and supply disruptions, which has depressed demand and caused some gas users to opt for coal and oil instead. Russian gas flow cuts could result in the Asia-Pacific region catering to around half of the anticipated growth in global gas demand till 2025.

Natural gas consumption around the world is predicted to contract a bit in 2022 and grow slowly in the next three years, according to the IEA (International Energy Agency), an autonomous intergovernmental organisation. Natural gas’ position as a dependable and cost-efficient energy resource has been hit as Europe is worried about supplies in the coming winter. This has also raised uncertainty about the role of natural gas in enabling developing economies to cater to increasing energy demand and move away from more carbon-intensive fuels.

IEA’s Gas Market Report, Q3-2022 forecasts that global gas demand is expected to rise by 140 billion cubic metres (bcm) between 2021 and 2025, which is less than half of what was predicted earlier and lower than the 170bcm rise observed in 2021. Weaker economic activity and fewer clean energy transitions are estimated to be the causes of the downward revision in gas demand growth in the future. The study recommends quicker implementation of renewable power generation and rigorous adoption of energy-saving practices to aid price-sensitive markets.

“Russia’s unprovoked war in Ukraine is seriously disrupting gas markets that were already showing signs of tightness,” IEA director of energy markets and security Keisuke Sadamori said in a press release. “We are now seeing inevitable price spikes as countries around the world compete for LNG shipments, but the most sustainable response to today’s global energy crisis is stronger efforts and policies to use energy more efficiently and to accelerate clean energy transitions.”

The European Union’s (EU) decision to gradually discontinue gas imports from Russia — which was previously its largest supplier — has caused Europe’s demand for LNG to suddenly shoot and impact gas deliveries originally meant for other regions. Russian pipeline gas exports to the EU are expected to go down by more than 55 per cent between 2021 and 2025, which could even drop to more than 75 per cent in an accelerated case.