What comes next for natural gas? Launch of the IEA 2019 medium-term gas market report

The growth in demand for gas has slowed worldwide, but gas could serve as an effective intermediary in the transition to a low-carbon future dominated by renewables. This possibility raises questions over how much should be invested in gas infrastructure and the extent to which policymakers should support the use of gas and new gas projects.

This was the key message from the International Energy Agency’s Medium-Term Gas Market Report 2016, presented in Brussels at Friends of Europe’s conference on 8 June. According to the report, global demand will increase at an average annual rate of 1.5% between 2015 and 2021. But this is down from the 2.5% observed from 2009 to 2015, when gas gained popularity in part because its combustion produces less carbon dioxide than coal. The reduced expectations have slowed new investment, with the IEA saying that no new export projects were commissioned in the first half of 2016.

One cause is the world’s slow economic growth combined with a decline in the global economy’s energy intensity. At the same time, gas is sandwiched between two other sources of power, which have clear selling points. “You cannot look at gas in isolation from what happens with other fuels,” said Fatih Birol, Executive Director of the IEA. “Coal prices are rock bottom, especially in Asia. If you don’t have regulations on air pollution, coal may be the preferred option. And the falling cost of renewables and government support for these squeezes the room for gas.”