OSLO (Reuters) – The International Energy Agency (IEA) has nudged up its global gas demand forecast for this year, but still sees the biggest fall on record due to the impact of the COVID-19 pandemic.
The Paris-based agency said on Monday it now expected gas demand to drop by 3% year-on-year, or 120 billion cubic metres (bcm), to 3,886 bcm.
In June, it forecast a 4%, or 150 bcm, fall.
“Global gas demand has been progressively recovering since June, driven mainly by emerging markets,” IEA director Fatih Birol said in a statement, after the agency published its “Global Gas Security Review 2020”.
However, he warned against assuming a return to “business as usual, as the current crisis could have long-lasting repercussions.”
The resurgence of COVID-19 cases and the prospect of a prolonged pandemic clouded the outlook for 2021, the IEA said.
It currently expects demand to rebound by 3% year-on-year, or around 130 bcm, to 4,014 bcm next year.
The IEA said the liquefied natural gas (LNG) market had played a key role in adjusting to the drop in demand, with global LNG exports plunging 17% between January and July.
“In this extraordinary context, LNG contracting activity has collapsed from its high of 95 bcm in 2018 to about 35 bcm in the first nine months of 2020,” it said.
Challenges also lie ahead for the LNG sector, with one-third of active contracts, or 190 bcm, due to expire over the next five years, the agency said.
Over the same period, global liquefaction capacity is expected to increase by 20% from projects currently under development, it added.
“These two factors will strongly impact the structure of LNG supply, and create new opportunities for buyers and challenges for marketers in a context of demand uncertainty.”