The International Energy Agency (IEA) has raised concerns over potential challenges in gas supply due to increasing global consumption and ongoing geopolitical tensions as winter nears.
In its latest report, the IEA noted that industrial demand, especially from Asia, is fuelling a sharp rise in gas usage.
The agency forecasts that global gas demand will grow by more than 2.5% this year, hitting a record 4,200 billion cubic metres.
The IEA also projected a further 2.3% increase in global gas demand by 2025.
One key uncertainty as Europe approaches winter is the transit of Russian gas through Ukraine, the agency noted. Existing contracts are set to expire at the end of 2024, potentially cutting off all Russian gas supplies to Europe via this route.
To offset this, Europe will need to ramp up its imports of liquefied natural gas (LNG) next year, the IEA added. However, this would place additional pressure on global supplies, as LNG remains crucial for balancing supply and demand.
The IEA highlighted that while bottlenecks in the Panama Canal and the Red Sea are affecting shipping, they have not yet caused a reduction in LNG supplies.
However, these disruptions reveal vulnerabilities in the LNG trade within an increasingly interconnected global gas market. The agency urged for more flexibility in gas and LNG value chains and stressed the importance of integrating Ukraine’s gas storage system into the global supply network.
Keisuke Sadamori, the IEA’s director for energy markets and security, noted that the projected growth in global gas demand this year and next signals a slow recovery from the energy crisis that severely impacted markets.
He warned, however, that the balance between supply and demand remains fragile and susceptible to volatility, underscoring the need for strong collaboration between producers and consumers.
Backstory
Geopolitical tensions in the past few weeks has risen following the escalation of the Israel-Hamas conflict to involve near full blown war with Iran. This is coming after the assignation of Hezbollah leadership in Lebanon by Israel and Iran’s
The Israel-Hampshire conflict joins the more than two year old conflict between Russia and Ukraine in Eastern Europe.
What this means for Nigeria
Around 70% of Nigeria’s electricity is generated from gas which is an international commodity and priced in dollars. Disruption is global supply chain and increase in demand could increase gas prices which will affect electricity tariffs in Nigeria.
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