The International Energy Agency (IEA) has announced that the world’s natural gas markets will likely remain constrained well into 2023 as Russia limits supplies and Europe reduces consumption in the face of high costs and energy-saving initiatives.
Global gas consumption is expected to drop by 0.8 percent in 2022 – the result of a record 10 percent contraction in Europe and static demand in the Asia-Pacific – and grow just 0.4 percent next year, the IEA said in its quarterly gas market report on Monday.
Still, the market outlook is subject to a “high level of uncertainty” due to Russia’s future actions and the economic effect of high energy prices over time, the IEA said.
“Russia’s invasion of Ukraine and sharp reductions in natural gas supplies to Europe are causing significant harm to consumers, businesses, and entire economies – not just in Europe but also in emerging and developing economies,” said Keisuke Sadamori, the IEA’s director of energy markets and security.
“The outlook for gas markets remains clouded, not least because of Russia’s reckless and unpredictable conduct, which has shattered its reputation as a reliable supplier. But all the signs point to markets remaining very tight well into 2023.”
Russia’s supply of gas to Europe has dwindled to a trickle since the shutdown of the Nord Stream 1 last month and the recent discovery of leaks in the pipeline.
Moscow has threatened to sanction Ukrainian energy firm Naftogaz, one of the last remaining Russian gas supply routes to Europe, a move that would exacerbate energy shortages coming into winter.
Europe has offset the decline in Russian gas supplies by importing LNG and using alternative pipeline supplies from producers such as Norway.
The IEA said it expected Europe’s LNG imports to increase by more than 60 billion cubic metres this year, keeping the market under pressure for the short to medium term.
Such an increase could draw imports away from Asia, keeping them lower than last year for the rest of 2022, the IEA said.
However, China’s new LNG contracts since 2021 and a colder-than-average winter could cause additional demand from Northeast Asia, the Paris-based intergovernmental organization said.