Rystad: With global gas markets in ‘fragile equilibrium,’ more LNG key to 2030 energy targets

Based on the 2024 Global Gas Report by the International Gas Union (IGU), Italian energy player Snam, and energy market intelligence group Rystad Energy, the world may face an energy deficit soon, with renewable energy targets at risk of falling through due to insufficient funding allocated to gas and clean energy projects.

As stated in the ‘Global Gas Report 2024,’ the demand for gas, which rose by 1.5% in 2023, is expected to rise to 2.1% by the end of 2024. If gas demand continues to grow as in the last four years, without additional production development, a global supply shortfall of 22%, or even more if the demand continues to increase, is expected by 2030. Scaling up investments is seen as the main solution for this issue. 

Energy demand has continued to grow in developed and developing regions, with importing regions struggling to curb it. Asia continues to drive this growth, while North America and the Middle East are leading the way in exports. Furthermore, the report states that Europe has seen a rise in energy demand despite efforts to boost efficiency and ongoing industrial decline.

This trend was also recently spotted in Western Australia, where imminent shortages are forecasted within 12 to 18 months. For this reason, the state’s liquefied natural gas (LNG) project developers are required to reserve gas for the domestic market even when exports might be more profitable. 

Snam CEO, Stefano Venier, commented: “The energy transition represents a unique challenge for mankind. A journey that will not be linear, marked by great aspirations and many hurdles, from geopolitical tensions to technology disruptions and unforeseeable global economy developments. In this continuously evolving transformation, natural gas and related infrastructure represents a critical element of sustainable resiliency for the global energy system, while new green and low carbon molecules will play an essential role to achieve a just and technologically neutral transition.”

Since 2023 was a record year in terms of coal burning, its byproduct – global energy emissions – followed suit, as indicated in the report. If current energy demand and supply trends continue, the authors believe the 2030 targets outlined in policy-driven decarbonization scenarios are not likely to be met. 

IGU President, Mme Li Yalan, noted: “Energy and gas demand continue to grow, driven by improving living standards in the developing world, new demand trends, and ongoing growth in developed regions. We must look for a realistic way to balance these trends with long-term sustainability goals, such as building a diversified energy system, and comprehensive approaches to tackle climate change. Embracing innovative solutions and flexible policies will be key to navigate this highly uncertain energy landscape.”

Based on the data from the report, energy demand has surpassed 2019 levels and continues to go up in North America, fuelled by the transport sector and AI data centers. Asia is also experiencing a rise in demand, especially in India and China’s industry centers. Furthermore, even though Africa’s energy demand seems to be growing faster than in most regions, equitable electricity access is still challenging in this continent, as well as in parts of South America. 

Enhancing investments in LNG supply and scaling up biomethane, carbon capture and storage (CCS), and low-carbon hydrogen technologies are described as essential for curbing greenhouse gas emissions and increasing the resilience of the global gas market equilibrium. This sentiment was echoed in a recent interview with James McAreavey, Head of CCUS at Xodus, a Scotland-headquartered energy consultancy.

As suggested in the Global Gas report, LNG provides an immediate opportunity to cut emissions from coal by 50% and oil by 30%. Despite some claims that an oversupply could be on the cards in the next few years, Rystad believes its potential in the emission reduction arena is yet to be fully used. 

“Natural gas, now 30% of the fossil fuel mix, is cheaper and cleaner than oil and coal, with emissions significantly lower than both. As global LNG access expands, natural gas is on track to surpass coal by 2030 and oil by 2050. We’re proud to support IGU and Snam in detailing these key market trends and the future trajectory of natural gas,” noted Rystad Energy CEO, Jarand Rystad. 

Another piece of the decarbonization puzzle is biomethane, which takes up only 1% of the natural gas market even though it is deemed a direct substitution for natural gas. While primarily produced in North America and Europe, new centers of biomethane production are emerging in hubs like China and India.

Six Japanese companies, including shipping major Mitsui O.S.K. Lines (MOL), recently launched a study to look into the potential for using biomethane produced at local dairy farms in Japan to fuel factories and vessels, thus contributing to the net zero by 2050 goal.

On a similar note, authors believe carbon capture capacity is gaining momentum, however, similar to biomethane and low-carbon hydrogen, its potential seems to be underutilized. These technologies are expected to play a critical role in decarbonizing the energy supply – especially in hard-to-abate sectors. Boosting them is seen as instrumental, which requires urgent investment and enabling policies to start building the growing volumes of project proposals.

Some players in Asia are already making headway in expediting energy transition. For example, the Asia Natural Gas and Energy Association (ANGEA) recently inked two deals to explore the role of LNG in the energy transition, one with the ASEAN Centre for Energy (ACE) and the other with the Korean Private LNG Industry Association.