This article is taken from World Energy (WE) number 47 – The world to come
The immediate impact of the COVID-19 crisis on global gas markets remains unclear, other than that it is likely to be less severe than for oil or coal. The International Energy Agency has projected that global gas demand in 2020 could fall by four percent (compared with nine percent for oil and eight percent for coal) before increasing at 1.5 percent per annum up to 2025. Prior to the crisis, the global gas supply surplus resulted in regional and international prices converging at historic lows. By reducing demand, the crisis forced prices even lower, resulting in strong incentives for short-term switching from coal and oil to gas where possible, but in the power sectors of many countries, this will be tempered by gas-to-renewables switching. To the extent that switching to gas is possible in non-power (especially industrial) sectors, where use of renewables may be more complicated, air quality improvement will be a powerful incentive. But widely anticipated national and global recessions means it is possible that any strong rebound of gas demand may be delayed. The impact of the energy transition on gas is also likely to be less severe, because of its lower carbon dioxide emissions compared with other fossil fuels. But fuel switching is a longer-term option in only a few countries— mostly in Asia—and will depend on whether much larger gas and LNG imports are considered acceptable in relation to energy security, and whether gas prices remain affordable in rapidly industrializing countries. Moreover, until methane emissions from pipeline and LNG value chains are measured with greater accuracy and independently certified, the greenhouse gas (GHG) footprint of natural gas will remain open to question. Gas prospects will be strongly related to the details of how individual countries and regions will be impacted by, and choose to adapt to, both the health crisis and the energy transition. This in turn will be determined by a combination of economic and policy impacts. The former will be principally governed by the price and availability of imported gas and LNG, and the latter by the priority which governments give to environmental issues: meeting netzero carbon-reduction targets which are more stringent than those set at COP21 (the 2015 UN climate summit), as well as targets for improvement of urban air quality. This article considers the crisis-related impacts on gas demand and international trade and investment, particularly in LNG projects, as well as longer-term transition impacts in relation to the major national and regional gas markets.