Gas carriers and LNG terminals are getting more and more busy. “Global Gas Report 2024 Edition”
By Marek Grzybowski
Rising energy demand across all regions and underinvestment in gas and clean energy are threatening global energy supplies, with 2030 energy targets clearly unattainable. Global gas markets remain in a fragile balance with limited supply growth. Demand is growing steadily, by 1.5% in 2023, with an expected acceleration to 2.1% by the end of 2024. Asia remains a key player and source of gas demand, while North America and the Middle East are export leaders – these are the key conclusions of the Global Gas Report 2024.
“If gas demand continues to grow at the rate it has over the past 4 years, without additional production expansion, a global gas supply shortfall of 22% is expected by 2030. If demand continues to strengthen, the shortfall will become more pronounced. This underscores the urgent need for increased [supply-side – MG] investment,” warn the International Gas Union (IGU), Snam and Rystad Energy in the Global Gas Report 2024 Edition.
Energy demand continues to grow in developed and developing regions. The situation is not helped by the growth in coal-fired power generation, even though coal burning increased more than ever in 2023. Last year, coal-fired power became the largest source of energy production. Another record was broken in 2023. If current trends in energy demand and supply continue, the 2030 targets set in policy-based decarbonization scenarios will most likely be missed, experts say.
“The research results show growing energy demand in all regions, record carbon emissions and extreme weather conditions, illustrating the urgent need for greater policy clarity on energy supply planning,” writes Li Yalan, president of the IGU, in the introduction to the report.
Gas is key to the economy
Li Yalan emphasizes that “the strong growth in gas demand confirms its key role in contributing to the reduction of global [greenhouse gas – MG] emissions, provides flexibility and resilience to the energy industry, enables efficient, affordable, sustainable development and supports the greater adoption of key clean energy technologies, including the scaling up of renewable energy sources. However, investments in natural gas and low-CO2 gas energy technologies have not kept pace with the growth in demand and this trend must be reversed.”
In fact, despite efforts to increase energy efficiency and a long-term decline in industrial activity, Europe has seen an increase in energy demand. In North America, energy demand has exceeded 2019 levels and is still growing. Demand in this region is driven by the transport and IT sectors. This significantly affects the fluctuation of gas prices, which are also subject to cyclical shocks.
Jarand Rystad, Chief Executive Officer at Rystad Energy notes that “the end-user price of natural gas is between $10 and $50/MWh. This is well below the prices of oil products, which are usually $100/MWh. Natural gas is also cheaper than coal in America and similarly or slightly more expensive elsewhere.” He points out that “CO2 emissions from gas are only 50% of coal emissions and 68% of oil emissions per unit of energy.”
The energy market and the share of gas in meeting energy needs have changed significantly over half a century.
“The share of gas available in world trade as LNG has increased from 0% in 1965 to 12% today and will reach 18% within a decade. So, being cheaper and cleaner than coal and oil and available worldwide, gas has doubled its market share compared to coal and oil from 1965 to 2020 and now accounts for 30% of the fossil fuel mix,” emphasizes Jarand Rystad. – In our scenarios of the future energy mix, natural gas will have a larger share than coal and this change should occur by 2030. In the case of oil, these proportions should change by 2050 – predicts Rystad.
Demand in Asia is also growing. Here, the demand for energy is generated especially in the industrial sectors of India and China. China’s industrial production in the first half of 2024 grew and required more energy. Increased exports generated demand for transport, which used more energy resources and energy than a year earlier than in the same period last year. We wrote about the high dynamics of China’s production and exports here.
In Africa, the demand for energy is also growing rapidly. It is forced by growing industrialization and is driven by the development of urban areas in selected countries. Energy demand in African countries still does not reach the levels that would be possible with full access to energy. The authors of the report note that “fair access to electricity remains a serious challenge in Africa and some regions of South America”.
LNG tanker lot in storms
Increased demand for natural gas in all markets generated demand for seaborne gas transport by LNG tankers. 2023 was a year of disruptions in the international shipping market. Since Q3 2023, drought in Panama lowered water levels in Lake Gatun, the source of water for the Panama Canal, reducing the number of daily transits and causing US LNG cargoes to take a longer route around the Cape of Good Hope to reach Asia.
In the Middle East, LNG tanker transits through the Red Sea have been restricted due to threats of attacks on ships by Houthi rebels in Yemen. In February, LNG ships began avoiding passage through the Red Sea and the Suez Canal. Tankers carrying liquefied natural gas in transit to Asia and Europe had to take longer routes around Africa. The market has partially addressed these constraints by using trade swaps and other measures aimed at optimizing ship operating costs.
“With the launch of 32 tankers in 2023 and 11 ships in January-February 2024, the LNG fleet consisted of 701 active tankers at the end of February 2024, including 47 operational FSRUs and 10 FSUs. This also represents a 5% increase in the fleet size from 2022 to 2023,” calculates Safety4Sea.
The order book is dominated by ships with the XDF system (141 units), which provide better fuel efficiency and lower emissions. Ships with the ME-GI system account for 16 contracts. Shipyards have 112 orders for ships with ME-GI propulsion systems. 68 ordered ships will be equipped with ME-GI or XDF systems. The specific system requires confirmation by the ordering party.
Thanks to the mild winter in the northern hemisphere in 2022, the market was better balanced in 2023, which lowered freight rates. In September 2023, Europe prepared for the winter in advance.
“Charters west of the Suez Canal reached USD 117,000 per day for steam turbine ships, USD 200,000 per day for TFDE/DFDE ships and USD 250,000 per day for diesel ships by the end of September 2023,” quotes the 15th IGU LNG Report Safety4Sea.
Due to high gas inventories in Europe and Asia, prices in 2023 have again fallen significantly below rates achieved in late 2022. Due to the reopening of most economies after the pandemic and the replacement of pipeline transport with LNG carrier deliveries, a total of 7,004 LNG commercial voyages were made to Europe in 2023, an increase of 1.7% compared to 2022.
Energy transition: a challenge for humanity
– The energy transition represents a unique challenge for humanity. It is a journey that will not be linear, marked by great aspirations and many obstacles, from geopolitical tensions to technological disruptions and unpredictable changes in the global economy – notes Stefano Venier, Chief Executive Officer at Snam. – In this constantly evolving transition, natural gas and its associated infrastructure are key elements of the sustainable resilience of the global energy system, while new green and low-emission technologies will play a fundamental role in achieving a just and technologically neutral transition.
To stem the growth of greenhouse gas emissions and ensure the sustainability of the global gas market, it is crucial to both increase investment in natural gas supply and increase biomethane production. Countries should also develop and deploy carbon capture and storage (CCS) technology on an industrial scale and develop the production of low-emission hydrogen.
According to the authors of the report, the use of natural gas allows for a significant reduction in greenhouse gas emissions compared to energy obtained from coal by 50% and from crude oil by 30%. Biomethane, which is a substitute for natural gas, also offers a chance to reduce emissions. “Currently, its scale is well below potential, accounting for about 1% of the natural gas market, and it is produced mainly in North America and Europe,” note the authors of the Global Gas Report 2024. New production centers are appearing in the industrial zones of China and India, which gives hope for progress in the production of this substitute for energy resources.
Market research shows that the possibilities of industrial CO2 capture are growing. This is an important activity enabling a successful energy transformation. Despite the progress observed in industrially developed countries, according to Rystad Energy experts, “the scale of introducing this technology is still well below what is needed, similarly to biomethane and low-emission hydrogen.”
These technologies will play a key role in decarbonising energy supplies (particularly in hard-to-contain sectors) and ensuring their resilience. Scaling them up is essential, requiring urgent investment and enabling policymakers to start generating a growing number of project proposals.
2023 a year of record emissions
The authors of the report emphasize that “as 2023 has become another year of record emissions and coal use, it is important to emphasize that switching from coal to natural gas is an easily accessible, cost-effective and inexpensive way to immediately reduce greenhouse gas emissions by about 50%”.
The analysis of the report shows that we still have a lot of work to do to reduce greenhouse gas emissions on all continents. The effects of efforts made to widely use renewable energy, increase the efficiency and scale of use of emission-free sources of energy production are still not very visible.
Not all of them are technologically and economically viable. And this is probably the main barrier to their dissemination on a commercial scale. Individual swallows of the implementation of solutions supported by public funds will not break the trend to use fossil fuels in energy production.
Asia and the Pacific were the regions generating the largest exports with 134.80 MT in 2023. This was a decrease of 0.32 MT compared to the export of 134.49 MT achieved in 2022. The Middle East was still the second largest export region with 94.69 MT in 2023 but this was a decrease of 1.84 MT compared to 96.53 MT in 2022. The third largest gas supply region was North America with 84.53 MT. Here, the gas supply increased by 8.90 MT compared to 75.63 MT in 2022. This is the result of the return to operation of Freeport LNG in the USA and reaching full production capacity. In this market, Calcasieu Pass increased production. In February 2024, the Marine XII FLNG plant in Congo started operating and began exporting LNG.
LNG markets finally regained their footing in 2023. Platts JKM, the Asian LNG price benchmark, averaged $13.86/million British thermal units (mmBtu) during the year. This was below the 10-year average of $12.01/mmBtu. The market was mainly balanced by a reduction in demand due to a mild winter and continued weak activity in energy-intensive industries, including the chemical industry.
There was also higher nuclear power generation and increased supply from renewable energy sources. Both industrial plants and households implemented energy-saving programs. Energy efficiency was also improved. The Global Gas Report 2024 notes that traditional importers from North Asia reduced their LNG purchases, with Japan, South Korea and Taipei reducing their consumption year-on-year. Only LNG to Europe was broadly unchanged. As markets returned to long-term average prices, South Asian markets showed an increase in demand. China, a recent driver of LNG demand, saw imports rise, albeit at a lower level than in the record-breaking 2021.
