Physical reserves, flexible contracts, policy measures needed for gas security: IEA

A combination of physical reserves, more flexible commercial arrangements and policy mechanisms can strengthen countries' gas supply security, the International Energy Agency said in a report Sept. 9, against the backdrop of two major supply crises over the past five years.

In the report, published ahead of the LNG Producer-Consumer Conference in Tokyo on Sept. 11, the IEA identified measures governments can implement over the next five years, alongside longer-term efforts to diversify supplies and strengthen infrastructure.

The report follows two major gas supply crises over the past five years that challenged long-standing assumptions about the resilience of global gas markets.

The sharp reduction in Russian pipeline gas supplies to Europe following Russia's full-scale invasion of Ukraine in 2022 drove prices to record highs and triggered a major reconfiguration of global LNG trade.

In 2026, disruptions to LNG flows through the Strait of Hormuz amid the Middle East conflict again highlighted the vulnerability of import-dependent economies to sudden supply shocks.

The IEA said the crises demonstrate that the reallocation of LNG supplies through competition for limited LNG cargoes during periods of acute stress can lead to extreme price volatility and significant economic impacts, and, in some circumstances, may not prevent physical shortages.

The IEA's report highlighted that measures to strengthen gas supply security ahead of such shocks carry upfront costs — similar to insurance — but that the economic cost of being unprepared can be significantly higher than the cost of investing in resilience.

Report findings

The report found that physical gas reserves remain a cornerstone of supply security and can take the form of underground storage, LNG tanks and floating storage.

At the same time, storage alone cannot address all potential disruptions, and the availability and effectiveness of storage options vary considerably across countries and regions, the IEA said, adding that new storage infrastructure can be expensive and take years to develop.

Greater commercial flexibility can therefore play an important complementary role, the IEA said. More flexible LNG contracts, commercial innovation and wider use of LNG cargo swaps could allow available supplies to move more efficiently between markets during disruptions, strengthening resilience and helping moderate price volatility without requiring major new infrastructure.

The report also examined existing policy-based reserve mechanisms that governments can deploy according to their individual circumstances, including mandatory storage obligations, strategic gas reserves and buffer LNG schemes.

The IEA added that joint strategic reserves using existing infrastructure, cross-border stockholding arrangements, cross-regional LNG buffers and mechanisms pooling LNG call options to provide a backstop during emergencies are among the options identified for further consideration.

The report recommended that governments deepen dialogue on gas security, improve transparency around reserves and market conditions, conduct regular emergency exercises and cooperate to enhance LNG market flexibility.

It also proposed further examination of voluntary international reserve arrangements, drawing on relevant lessons from the IEA's long-standing oil security framework.