Global gas supplies are set to remain tight in 2023 and the global balance is subject to a wide range of uncertainties. Risks such as a dry summer or cold Q4, lower LNG availability and the possibility of a further decline in Russian pipeline gas deliveries to the EU set the ground for cautious optimism, according to the Gas Market Report Q2. -2023 released by the International Energy Agency (IEA).
The IEA—a Paris-based agency gathering of 31 industrialized nations and most of the European Union—revealed in its report that global gas demand is expected to remain flat in 2023, with higher demand in Asia Pacific and the Middle East offset by Europe and Expected decline in North America.
In Asia, gas demand is forecast to increase by around 3 percent, with China and India as the main drivers. In China, demand is forecast to increase by more than 6 percent in 2023, supported by improving economic activity and potentially higher gas use in industry.
In the Middle East, gas demand is forecast to increase by 2 percent, driven by Iran and Saudi Arabia. Demand is forecast to fall by 5 percent in advanced economies in Europe as rapidly expanding renewables take a toll on gas-fired generation. After strong growth in 2022, gas demand in North America is expected to decline by 2 percent as a result of less gas use for space heating, power generation and industry.
LNG supplies not enough to make up for short supply from Russia
European and global gas markets suffered a major supply shock in 2022 when Russia sharply reduced its pipeline gas deliveries to the EU – by 80 percent during the year – and triggered a global energy crisis.
The level of Russian pipeline gas supply is a major uncertainty for the remainder of 2023. If flows to the EU continue at the levels seen in the first quarter, Russian piped gas supplies to advanced economies in Europe will drop by 45 percent in 2023. As per the IEA, by 2022.
After a decline of 90 BCM in Russian gas production in 2022, Russia’s production is expected to fall by more than 50 BCM in 2023 on low exports and muted domestic demand, adding to the challenges facing the Russian gas industry.
Additionally, global LNG supplies are projected to grow by only 4 percent (or just over 20 bcm) in 2023, which will not be enough to cover the expected shortfall in Russia’s piped gas supplies to Europe.
LNG became a new baseload supply for Europe, accounting for two-thirds of the region’s imports through the 2022/23 winter season and meeting nearly one-third of its gas demand.
After strong growth in Q1 2023, OECD Europe’s LNG imports are expected to decline for the rest of the year amid lower injection needs and a continued decline in European gas consumption.
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