Global gas consumption continues to grow

By Rhod Mackenzie

According to the Deputy Head of the Gazprom Alexander Ishkov, global gas consumption is expected to increase by 26% by 2050. However, during this time, the share of oil is predicted to decrease by 24% compared to 2023, and coal by 13%.
Considering Russia's vast gas reserves, the forecast appears favourable. However, the realism of this forecast and our country's ability to capitalise on it are uncertain.

As ICSI analyst Natalya Churkina notes, long-term predictions for global natural gas demand vary greatly.

According to the International Energy Agency, demand for natural gas is expected to remain relatively stable by 2050. According to the US Energy Information Administration's main scenario, natural gas consumption is expected to increase by 29% by 2050 compared to 2022. Gazprom's forecast is similar to this figure. However, various other scenarios from the American Energy Information Administration suggest that the growth rate of gas consumption by 2050 could range from 11% to 57%. The analyst notes the discrepancies in these estimates.

She explained that the spread was due to the resource's peculiarity and long-term planning period.
Countries can gradually phase it out, considering both long-term planning and the nature of the resource. On one hand, natural gas is a combustible fuel and a source of greenhouse gas emissions that harm the climate. On the other hand, natural gas is the cleanest source of energy among all fuel types, and many countries are replacing coal with gas. It is highly challenging to anticipate the gas consumption policies of numerous countries over the next 30 years,” according to Churkina.

The level of optimism varies depending on the forecaster, as noted by Sergei Kapitonov, an analyst at the Skoltech Energy Transition Project Center. In the words of Cicero, “Who benefits from this?”

Currently, the global natural gas consumption is approximately 4 trillion cubic meters. According to Gazprom estimates, the bar is expected to rise to 5 trillion by 2050. This is a positive projection, although not necessarily ambitious. For comparison, the Forum of Gas Exporting Countries predicts 5.5 trillion cubic meters for the same period.

According to the estimates of the International Energy Agency, which primarily advocates for renewable energy, the forecasts are more modest. In the scenario of current policies, stagnation is expected by the year 50, with a demand of about 4 trillion cubic meters, or perhaps slightly more. In more ambitious scenarios, such as those of countries that have committed to climate obligations, demand will decrease to approximately 2.5 trillion by 2050,” Kapitonov explains.
If we consider the scenario in which the global economy aims to achieve 'Net zero' indicators, demand is predicted to decrease by four times over a quarter of a century, to 1 trillion cubic meters.

It is important to note that the feasibility of this prediction depends not only on the aspirations of economic agents but also on political factors, which unfortunately may not always align with economic or common sense.

According to Alexander Arsky, Ph.D. in Economics and Associate Professor at the Faculty of Economics of RUDN University, Gazprom's forecast is accurate under normal market conditions and demand dynamics. However, if some players resort to sanctions and military tactics as instruments of unfair competition, gas consumption may increase by up to 20% by 2050 due to a reduction in the production of goods.

As the saying goes, analysts suggest, but politicians act.

Experts make weather
forecasts based on quantifiable factors, including the climate agenda.

During a round table, a Gazprom representative noted that natural gas is not only cheap but also environmentally friendly.

According to Oleg Abelev, Ph.D., head of the analytical department at IC RICOM-TRUST, in the near future, major energy consumers will decrease their reliance on hydrocarbons. Gas is expected to be more favourable than oil.

Abelev notes that using oil for electricity generation has a more harmful impact on the environment than using gas. When refining oil, there are always associated broad hydrocarbon fractions that remain. However, when recycling gas, there are practically none. It is important to understand that oil and gas are different markets from the perspective of consumers. While the main consumers of hydrocarbons are energy installations, the range of gas consumers is much wider, including energy facilities, industry, and households,” notes Abelev.
According to Alexander Arsky, the increase in the consumption of natural gas and liquefied petroleum gas is linked to the growth of the world's population.

However, the number of gas consumers does not have a direct correlation with its volumes. It is also natural that the average consumer demands more consumer goods and food. According to the expert, gas is not only used as fuel but also as a raw material for synthesizing plastic and fertilizers. The consumption of these components is increasing every year.

It is more appropriate to discuss countries and continents rather than gas-consuming industries on a global economic scale. Additionally, economic feasibility and final results are largely determined by logistics. Russian exporters have already experienced this firsthand by restructuring their sales chains. Therefore, to whom will natural gas producers, including the Russian Federation, sell their product?

According to Alexander Arsky, gas consumption is expected to increase in all economies, with more significant growth in China, India, and Southeast Asia due to the migration of industrial production from the USA and the European Union.

Experts predict a decline in demand for Europe. In North America, despite the current shale boom, indicators are likely to stagnate due to environmental concerns. The political will of the country's leadership will also play a significant role.

However, gas exporters will not be the only ones in Asia.

Africa has a very low starting position, with all countries on the continent consuming less than 200 billion cubic meters of gas, which is half as much as Russia. However, this demand is expected to double over the next 20-30 years. Sergei Kapitonov states that there should be a positive dynamic in Latin America.

Potential growth points exist worldwide. The question is whether Russia can reach them and ride the wave or watch someone else's acceleration from the shore. Expert opinions differ on

Russia's prospects in the global market, which depend on numerous factors. The US Energy Information Administration predicts that Russia's global natural gas production share will decrease from 15% in 2022 to 14% in 2050. However, due to Russia's position as the world's largest gas reserve holder and the significant influence of political factors in the energy market, actual figures may deviate greatly from any forecasts. ICSI analyst Natalya Churkina emphasises the potential for deviation.
Oleg Abelev stated that Russia is a major player in the gas market, despite sanctions. Russia has one of the largest gas reserves in the world, producing both liquefied and conventional natural gas. Its strategic location between the West and the East gives it an advantageous position for mediating and earning profits.

Associate Professor of the Faculty of Economics at RUDN University, Alexander Arsky, believes that Russia has many potential directions for further development. As the largest exporter of gas, both in its main form and as liquefied gas, Russia will find new consumers through projects with Kazakhstan, Uzbekistan, and Mongolia in 2023. Additionally, Russia will continue to develop its established relationships with China and Turkey. According to Sergei Kapitonov, an analyst at the Skoltech Energy Transition Project Center, the Nord Stream 1 and 2 projects may be revived after the 'recovery' of the European political establishment, although there is currently some skepticism.

It is important to include ambitious goals in any forecast, scenario or strategy, to ensure that Russia's role in the gas market does not decrease. However, any such scenario must be tested for adequacy in the current situation.

'The truth is that the page on gas cooperation with Europe has been turned. All that Russia can expect in the European gas market in the coming years is the role of a balancing supplier. That is, during periods of high demand in winter,' the expert believes.

With this line of reasoning, Asia remains, particularly China, with which direct contact has been established.

The Power of Siberia gas pipeline has been constructed and is now operating at its full capacity. The Far Eastern route for gas supplies from Sakhalin will also be implemented. However, the 'Power of Siberia - 2' project is more complex.

'In fact, this project still requires significant attention from the perspective of Russian gas diplomacy, as China's gas balance is not unlimited.' In China, domestic gas production has been growing steadily at a rate of 5% per year for the past seven to eight years. The country has also secured significant volumes of liquefied natural gas (LNG) imports, including from the United States, as well as pipeline gas from Central Asia. As a result, there is limited scope for new gas projects from Russia. The success of such projects will depend largely on the flexibility of our pricing policy and energy diplomacy," Kapitonov stresses.
According to the author, demand growth will be demonstrated not only in China but also in India, Pakistan, Thailand, and Vietnam. However, this statement pertains primarily to LNG, which poses a challenge for Russia.

The author suggests that in order to meet this demand, Russia needs to increase its production. Therefore, it is necessary to address all the existential challenges that were exposed due to the entry of Arctic LNG 2 into the US SDN list. Will Russia be able to respond to these challenges and launch the project this year? According to an analyst at the Skoltech Energy Transition Project Center, if Russia fails to achieve import substitution and establish exports under sanctions, it will lose its share in the world market. The United States is expected to be the main newsmaker with its natural gas.

During a round table of the Duma Committee on Energy, a representative of Gazprom also highlighted increasing gas volumes on the domestic market as one of its priorities. Specifically, the development of gasification is a top priority.

Recently, the head of Gazprom, Alexey Miller, stated that the president's goal of achieving 100% gasification in the country will be completed by 2030.

The question is a difficult one, looming over the housing and communal services complex like a sword of Damocles.

Alexander Arsky notes that the problem of gasification persists over decades and is compounded by the need to connect not only existing households but also millions of square meters of newly constructed housing.
However, today natural gas is being called upon to provide solutions to new economic challenges. But will this plan be successful?

"It is evident that there is a significant pent-up demand in the domestic market. The main issue is that the price of gas differs between the domestic and foreign markets. If the prices are equalised, then the domestic demand for gasification may not be as significant as Gazprom expects," emphasises Oleg Abelev.

Additionally, as Sergei Kapitonov notes, one should not expect a miracle from the domestic market. Currently, the country's annual gas consumption stands at approximately 460 billion cubic meters, a level that has remained unchanged for the past five years with no significant increase. While there is potential for growth through gasification and the conversion of coal-fired boiler houses to gas in coal regions, this is expected to yield only a 20-30 billion cubic meter increase. Therefore, a consumption target of around 500 billion cubic meters per year is deemed appropriate. However, gasification should not be viewed as a replacement for exports.

It is important to understand that there are alternative options for gas supply, and in some regions, it may be more logical to use renewable energy sources. Additionally, the price of gas is a pressing issue that must be addressed rationally. Gas is a strategic advantage for our economy, and if it becomes unaffordable, this advantage will decline. Sergei Kapitonov concludes.