IEA: Demand for LNG Will Continue to Rise for Years Despite Pandemic

Fri, October 23, 2020

The COVID-19 pandemic and the subsequent effects of global stay-at-home orders have caused turmoil throughout the oil and gas industry. In its flagship publication, the International Energy Agency (IEA) projected that global energy demand will not return to pre-pandemic levels until 2023, at least.

While that may be the case, IEA’s publication, World Energy Outlook (WEO), predicted that the demand for oil and natural gas will not disappear. The WEO provides a variety of potential scenarios involving emissions and energy demand, including one in which COVID-19 comes under control by 2021 and another in which a prolonged pandemic continues to negatively affect the global economy. In both of these scenarios, global natural gas demand is expected to increase through 2040 while global CO2 emissions are projected to stay below pre-crisis levels.

In fact, the WEO highlights how natural gas demand in certain regions of the world, such as the fast-growing markets in Asia, Africa, and the Middle East, will continue to increase throughout the next decade.


World Energy Outlook: Changes in natural gas demand by sector in the Stated Policies Scenario, 2019-2030


South and East Asia are expected to see the most dramatic increase natural gas demand thanks, in part, to policies focused on improving air quality. For example, China recently announced an ambitious goal to be carbon neutral by 2060 which, combined with an aggressive transition away from coal and toward natural gas, will help the country see a significant decrease in CO2 emissions.

According to the IEA’s June 2020 report on the global gas market, the U.S. is the largest driver of liquefied natural gas (LNG) output, which is projected to be a significant part of the international gas trade through 2025. Although there are large natural gas production projects throughout the Middle East and Russia, East and South Asia will see the highest LNG demand into the foreseeable future.


World Energy Outlook: Regional breakdown of gas demand growth, 2019-2025


Texas will be well-equipped to meet this demand, with several LNG export terminals along its shores, including Freeport LNG and Corpus Christi LNG, which are currently operational and shipping to Europe, Asia, and South America. A third Texas LNG export facility, Golden Pass LNG, is under construction and expected to send out its first shipment in 2024.

This rise in natural gas could help combat energy poverty abroad. The WEO found that the number of people without access to electricity in sub-Saharan Africa is set to rise in 2020 in the wake of COVID-19. Shipments of LNG from the U.S. to regions of the world like sub-Saharan Africa not only provides natural gas-powered electricity to homes and businesses, but also allows for economic and social development. Natural gas is more reliable, affordable, and produces fewer CO2 emissions than coal, which has historically been the main source of energy in developing regions. Overcoming energy poverty – or a lack of access to electricity – through the switch to natural gas is one of the quickest means to improve the health and economic situation of people across the globe.

Increased production from shale basins in the U.S. like the Permian, shipped down to LNG terminals along the Gulf of Mexico and exported across the ocean, can transform the world, delivering affordable energy to places that need it most.