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Global gas demand to rise by 3.2% in 2021, offsetting 2020 losses: IEA

Highlights

Industrial demand to drive global increase

But warns of continued impact of pandemic

European gas demand set to rise by 3% in 2021

London — Global gas demand is expected to increase by 3.2% year on year in 2021, enough to more than offset the lost consumption in 2020, the International Energy Agency said in its latest quarterly market report published April 15.

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Gas demand fell by 1.9% -- or some 75 Bcm -- in 2020, but recovery is expected this year, driven by demand in the industrial sector.

"We expect globally to see a rebound, sufficient in our view not only to offset last year but also show some growth compared with 2019," IEA senior analyst Jean-Baptiste Dubreuil said during a webinar presenting the report.

However, he said, the forecast demand growth was "highly fragile" and dependent on the path of global economic recovery.

Consumption in the industrial sector, which remained resilient in 2020 with an estimated 1.2% annual decline, is expected to take the lead in 2021 with 5.4% year-on-year growth -- close to 55 Bcm.

There is risk to this, however, because industrial demand is "intimately" related to GDP factors, Dubreuil said.

He added that while the picture is brightening for demand, especially in emerging markets, the recovery is "not the same" for all regions.

"Some mature markets -- such as North America -- are unlikely to see a full recovery this year," he said.

In the Q1 report, the IEA also said the prospect of a prolonged impact of the COVID-19 pandemic on the global economy "adds further uncertainty to the pace of short-term gas demand growth."

Power demand

Gas demand from the power generation sector is facing a more challenging environment, the IEA said.

"Gas consumption for power generation was already the most affected segment in 2020, accounting for an estimated 45% of the total annual decline, despite favorable fuel-switching dynamics in North America and Europe," it said.

"2021 is expected to see limited growth in electricity demand, strong competition from increasing renewable capacity and lower cost-competitiveness against coal as gas prices recover from their 2020 lows," it said.

"This forecast therefore expects a 1.2% increase in gas-for-power burn in 2021, not sufficient to offset the estimated 2.1% year-on-year drop seen in 2020."

A cold start to 2021 provided support for heating demand after a "tough year" for gas demand in the residential and commercial sectors, which fell by 2.4% year on year in 2020, the IEA said.

Following strong growth in Q1, European gas demand is expected to increase by 3% in 2021, recovering to its pre-crisis levels, it said.

"The sharp increase in carbon prices is expected to support additional gas burn in the power sector through the summer, while industrial gas demand is expected to continue its recovery amid improving economic conditions," it said.