Global gas balance still 'fragile' on limited LNG output growth: IEA

The global gas balance remains "fragile" as limited LNG production growth keeps supply tight amid rising global demand, the International Energy Agency said Oct. 3.

In its annual Global Gas Security Review, the IEA noted that following the supply shocks of 2022-23, gas markets returned to more pronounced growth in 2024.

"This forecast expects global gas demand to reach new all-time highs in 2024 and 2025," it stated, adding that total demand is set to grow by over 2.5% to a record high of 4,200 Bcm this year, driven by growth in the Asia-Pacific region.

While supply remains tight, geopolitical tensions continue to cause price volatility, the IEA said. "Markets remain sensitive to unexpected supply or demand-side movements," it added.

Gas prices in Europe and Asia have remained volatile throughout 2024, reacting to events that could threaten supply, such as the Ukrainian incursion into Russia in early August.

Platts, part of S&P Global Commodity Insights, last assessed the benchmark Dutch TTF month-ahead price on Oct. 2 at Eur38.65/MWh.

This compares with a recent low of Eur22.95/MWh on Feb. 22 and a recent peak of Eur55.23/MWh on Oct. 13, 2023.

Demand growth

The IEA reported preliminary data suggesting gas consumption increased by 2.8% year-on-year in the first three quarters of 2024, well above the 2% average growth rate from 2010 to 2020.

"The fast-growing markets of Asia accounted for the majority of this growth," it said.

For 2024, global gas demand is forecast to grow by just over 100 Bcm, with the Asia-Pacific region expected to account for nearly 45% of incremental global gas demand.

"Industry and energy own use is emerging as the primary driver behind stronger gas use and is projected to contribute more than half of demand growth," it noted.

This is partly supported by continued economic expansion in fast-growing Asian markets.

The IEA also mentioned a recovery in Europe's industrial gas demand, although it remains well below pre-crisis levels.

In 2025, global gas demand is forecast to increase by another 2.3% -- or nearly 100 Bcm -- again driven by Asia, which alone is expected to account for over half of incremental gas

Supply outlook

The IEA also said that with the gas supply remaining fundamentally tight, uncertainties weigh on the 2025 outlook.

Global LNG supply growth remained weak in the first nine months of 2024, increasing by just 2% year on year. "This is well below its 8% average annual growth rate between 2016 and 2020," the agency stated.

Project delays and feed gas supply issues at certain legacy producers -- including Angola, Egypt, and Trinidad and Tobago -- have hindered LNG production growth, it added.

However, the expected start-ups of the Plaquemines LNG export terminal in the US and Tortue FLNG off the coast of West Africa are anticipated to improve LNG supply availability in Q4.

For the full year, global LNG supply is expected to grow by 2% -- its slowest growth rate since 2020.

In 2025, LNG supply growth is set to accelerate to nearly 6% as several large LNG projects come online.

North America is expected to account for about 85% of global incremental LNG supply in 2025, with nearly three-quarters of these volumes coming from the US.

However, the IEA noted that Russia's Arctic LNG 2 project is not considered a source of firm LNG supply in the current forecast due to the broader sanctions environment.

Ukraine transit

The IEA also said the future of Russian gas transit via Ukraine was a "key uncertainty" ahead of the 2024/25 winter, as both the transit and interconnection deals between Russia and Ukraine expire at the end of 2024.

In 2023 Russian gas transit flows via Ukraine totaled 14.65 Bcm of which some 12.8 Bcm was sent to the EU and an estimated 1.8 Bcm to Moldova.

This is in line with the position of S&P Global Commodity Insights, which also continues to forecast zero transit from January 2025.

"We expect the end of the transit to force Europe to rely more on its storage and on alternative supply -- mostly LNG -- increasing storage refill needs in the following summer," it said in a recent report.

The IEA said the halt of the transit would translate into the loss of around 6 Bcm of gas supply into the EU in Q1 2025 and would necessitate higher European LNG imports.

"This in turn would drive stronger competition with Asian buyers for flexible LNG cargoes and lead to tighter market fundamentals," it said.