Unless reinvested, there will be a shortage of gas on the market for decades to come, which will directly affect the pockets of consumers. These are the conclusions of this week’s latest report from the IGU (International Gas Union) association, entitled Global gas report 2023.
The verdict of the study invites reflection. It says global natural gas supplies will fall over the next few decades without new investment, leading to more severe and frequent price shocks than those experienced in the past 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. It is enough to think about the increasingly intensive use of air conditioning systems during heat waves.
However, the problems will come from the gas supply side. The supply is expected to decrease little by little. The cause? The 58% reduction in investment between 2014 and 2020.
It is true that since then the sector has returned to investing, but the various consumption forecasts for the coming decades, depending on the extent to which the objectives of the Paris Agreement are met, make it difficult for there to be a balance. Rather we are heading towards a lack. “The study shows how to 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 will end up paying”, warns the professor of energy resources at the University of Barcelona Mariano Marzo.
“Restoring a sustainable balance in the world 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 face the natural decrease in supply, the dynamics of global demand and the likely growth in various regions”. Indeed, there are deposits that are about to be exhausted and gas production will decline. So, the current level of global gas production will reach 4 trillion cubic meters in 2030, but will fall to just over one trillion, a 75% decrease, in 2050.
The sector is confident that there will be future discoveries that could partially offset these declines, but we are in the realm of forecasts. If current demand trends continue, the lack of gas will begin to be felt at the end of this decade. Even in the hypothesis that it is possible to significantly reduce consumption, the supply may still be insufficient. Li Yalan, president of the IGU, warned that “the current natural gas network will not meet the majority of possible demand prospects.”
After the outbreak of the Ukrainian war in 2022, Europe has tried to reduce gas consumption (especially after the increase in prices). And it can be said that it has succeeded, with a decrease of 12%, also thanks to a milder than expected winter.
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 was only reduced by 1.5%. Still thirsty 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 needed, so that there is a guarantee of return on the capital contributed”. But this requires a time horizon that guarantees stability. “Decarbonization is confused with electrification. In reality, it must be assumed that in the best of scenarios there is 50% of the energy production that cannot be electrified. And if there is no investment in production, the rigidity of the offer will lead to strong price volatility”.
