IEA sees tempered gas demand growth in Asia
Gas demand growth in Asia was a “robust 7%” in 2021, the International Energy Agency (IEA) said in its latest natural gas quarterly report, published January 31, but that growth is expected to slow to around 5% this year, continuing a trend which began last summer.
“The pace of growth across Asia…decelerated markedly in the second half of the year,” the IEA report notes, falling from a “remarkable” 14% year-over-year in the January to July period to close to zero in August to December “as high prices, slowing economic growth and weather normalisation moderated consumption.”
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China will continue to drive demand growth in 2022, the report forecasts, accounting for about 66% of Asia’s overall growth. Emerging Asia (Indonesia, Thailand, Pakistan and Bangladesh) will contribute 26% of the total, followed by a 10% contribution from India.
IEA energy analyst Akos Losz told a February 1 webinar hosted by the Center on Global Energy Policy (CGEP) at Columbia University that LNG demand growth in China will continue this year, though not at levels seen in 2021.
“China is still the biggest contributor to LNG imports growth in 2022, but that growth will track back from 17% to 9%,” he said. “This is mainly because we expect pipeline gas flows from Russia to continue to ramp up and we also expect slowdown in the overall gas demand trajectory.”
Gas demand in Emerging Asia increased by a modest 3% in 2021, the IEA said, as high prices and resurgent waves of Covid-19 kept demand in check.
“High LNG prices also triggered fuel switching away from gas, especially in Pakistan and Bangladesh, but strong power demand and domestic gas production declines in both countries meant that LNG import growth continued even amid record-high spot LNG prices,” the report said.
In 2022, demand is expected to increase by about 5%, driven by economic recovery and increased electricity demand. LNG will continue as a significant source of supply, Losz said, largely because the region really has no other options.
“They have really very few options other than to keep importing LNG and try to substitute it wherever they can with other fuels,” he said. “To the extent they have contracted supply and to the extent they have sectoral demand that is not particularly sensitive to feedstock costs, I think they will keep importing LNG, regardless of the high prices.”
And gas demand in India – which reached 5% through the first 11 months of 2021 – is expected to grow by 8% in 2022, the IEA said, supported by economic growth, expanding infrastructure and rising domestic production, which comes at a lower cost than imported LNG. Still, high LNG prices could present some headwinds to India’s overall gas demand recovery this year, the report said.