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IEA cuts 2040 EU gas demand forecast by further 22 Bcm

Highlights

Under stated policies, demand set to drop to 386 Bcm

Down from last year's outlook forecast of 408 Bcm

EU set to become 90% import dependent by 2030

London — The International Energy Agency has cut its forecast for EU gas demand for 2040 by 22 Bcm, with the bloc also set to become increasingly import dependent as domestic output plunges, the agency said in its latest World Energy Outlook published Wednesday.

In the outlook, it said EU demand is now expected to fall to 386 Bcm in 2040, according to its central base Stated Policies scenario that takes into account announced policies and targets.

That is down on the 408 Bcm forecast from last year's outlook for 2040, which itself was down from a 2040 prediction of 454 Bcm in the 2017 edition.

The "sharp" decline in European gas demand means overall global gas demand under the Stated Policies scenario is still expected to grow to around 5.4 Tcm by 2040, with demand growth in the US offsetting the European drop-off, the IEA said.

Only in the power sector does EU gas consumption outperform last year's forecast, with demand set to hit 159 Bcm in 2025 -- up from 153 Bcm predicted for 2025 last year.

Gas demand in European power generation is set to be buoyed by the retirement of coal and nuclear plant through the 2020s.

In all other sectors -- industrial, buildings and others -- consumption is seen falling more quickly than previously forecast.

EU PRODUCTION

While demand is set for a sharp decline, domestic EU gas production is seen falling more quickly, meaning the EU will become more import-dependent.

EU gas production is forecast to plunge from current levels of 120 Bcm to just 40 Bcm in 2040, the IEA said.

"In Europe, gas production drops by 25% over the next decade, resulting in large part from the cessation of production at the earthquake-prone Groningen field in the Netherlands by 2022, and gradual resource depletion in the offshore North Sea," it said.

Europe remains buoyed only by non-EU member country Norway.

"Norwegian production remains close to today's record highs before tailing off gradually," the agency said.

"For Europe as a whole, marginal productivity gains from existing fields and some new offshore developments limit the decline in production to 90 Bcm to 2040 (compared with a decline of 250 Bcm -- or 90% -- if there were no further upstream investments)." Still, the IEA sees the EU becoming more dependent on imports, including from dominant supplier Russia.

"The EU's dependence on imported gas grows to nearly 90% by 2030 and the region retains a balancing role in global gas trade, thanks to a well-integrated gas market and a diversified mix of LNG, pipeline imports and storage infrastructure," it said.

Globally, Russia and the Middle East retain their role as the largest gas exporting regions, but emerging exporters increase their market share.

"Australia briefly overtakes Qatar as the world's largest LNG exporter, while the US becomes the second-largest gas exporter after Russia by 2025," it said.

Africa provides nearly 40% of export growth in the period 2025-40, primarily due to growing LNG exports from East Africa.

-- Stuart Elliott, Stuart.Elliott@spglobal.com

-- Edited by James Leech, newsdesk@spglobal.com