Global Gas Report IGU 2023

Global Gas Report 2023
Foreword
We are pleased to present the 2023 edition of the
Global Gas Report, which offers a significant perspective on
the evolution of the global gas markets amidst a historical
global energy crisis. This crisis has been unfolding in parallel
with the energy transition towards a more sustainable future, as
the world has struggled to align with the decarbonisation goals
outlined in the Paris Agreement. Global emissions grew in 2022
with coal related emissions reaching an all-time high, due to gas
to coal switching amidst the gas price and supply crunch.
Stefano Venier
Chief Executive Officer, In 2022, the global gas markets experienced shifts demonstrating
Snam
remarkable flexibility and exceptional resilience, in the face of
unprecedented shocks from supply and demand sides. These
shocks included the conflict between Russia and Ukraine, which
exacerbated to the extreme the already tight global supply
situation and drove gas prices to the highest ever recorded, as
the supply of Russian pipeline gas to Europe dropped,
causing a pressing search for additional imports to the
continent. The unaffordable prices were detrimental to many
developing countries, especially in South Asia, who suffered
Li Yalan painful energy supply shortages and prolonged blackouts.
President,
IGU
Nevertheless, by September 2023, European storage levels
exceeded required capacity, thanks to expanded import
infrastructure, massive additional LNG inflows, and increased
production of domestic natural gas. While Europe’s
commendable rapid development of new infrastructure and
efficient utilisation of existing gas networks has been critical in
rebalancing the regional situation, we should not forget that it
does not eliminate the lingering supply risk, as global gas supply
remains just as constrained.
Martin Opdal
Partner Consulting, Undoubtedly, we saw greater focus on energy security by
Rystad Energy governments, energy companies, and financial institutions,
with investments in infrastructure for source diversification
and alternative energy sources. This helped to establish a new
equilibrium in the gas market, although it remains unstable and
seems already challenged by the new conflict in the Middle East
between Israel and Hamas.
We are also continuing to witness a high level of uncertainty in

energy supply planning for 2030 and beyond. The substantial
discrepancies in major energy and gas demand and supply
outlook scenarios have introduced a significant level of risk into
the gas markets going forward, raising questions about the
necessary investments to achieve a more stable equilibrium. We
delve into this issue in-depth in the report, exploring the ranges of
variability across different scenario assumptions and their
implications for supply security in the future.
Global Gas Report 2023 3

Foreword
We emphasize that the prolonged period of low investment in the development of

natural gas resources over the past decade has been a major factor contributing to
the current supply shortage. To achieve balance in the market and to ensure
affordability, sustainability, and security of supply, new investments in natural gas
are required, alongside investments in low carbon gaseous energy, including
renewable natural gas, hydrogen and carbon capture and storage.
As we think about how much gas we will need in the coming decades, we mustn’t
forget about the emerging regions of the world where population and energy needs
are quickly growing. The huge economic engines of the most populous countries in
the world, China, and India, still rely heavily on coal, and the gas crisis contributed to
an upward trajectory of its use. Africa is the fastest growing region of the world with
the youngest population, 600 million of which lacks access to power while many
others are faced with unstable energy systems and weak infrastructure that require
reinforcement for any energy transition to happen.
Importantly, while natural gas will continue to play a pivotal role in the energy
transition facilitating the decarbonisation of the global economy, the gas sector itself
will also undergo a process of decarbonisation. This is imperative, and we call for an
acceleration in the deployment of carbon capture, low-carbon, and renewable gases.
We also stress that doubling down on the elimination of methane emissions is required
to make this transition possible. Realising these ambitions will require collaboration
within the gas industry and, importantly, the implementation of appropriate policy
tools and frameworks, including emission pricing, the removal of barriers to
deployment, and access to finance.
To this end, this year's report explores future pathways for natural gas, low-carbon,
and renewable gases to drive the energy transition, in conjunction with the increasing
share of renewable energy and storage technologies. Amongst the pathways, we
underscore the critical importance of energy conservation and efficiency to minimise
demand, with numerous readily available opportunities to pragmatically reduce gas
consumption without hurting the economy.
Finally, as we have seen in a clear case example last year when it saved Europe, LNG is
a critical energy source that is flexible, abundant, and efficient. The report includes a
highlight section on the role of LNG in delivering essential energy transition flexibility
now and in the future, as it will become increasingly necessary in a decarbonised world,
while also progressing to decarbonising the fuel. So, we emphasize that only gas
investments capable of demonstrating their future-proofing and excellence in
reducing methane emissions are likely to succeed.
Today more than ever, the world requires comprehensive energy planning to achieve
a better balance between security, sustainability, and affordability, because when
security and affordability are compromised, sustainability fades out of focus. Hence,
balancing this trilemma is essential for the global energy transition to take place and to
achieve the deep emissions reduction necessary in the fight against climate change.
We invite you to delve into this report and explore the future pathways for the gas
industry, learning how gas will continue to provide the assurance of sustainable,
secure, and affordable energy for the world.

Contents
Executive summary 6
1 / Review of the most turbulent year in the history of gas 12

• Highlights 13
• Developments in gas demand 15
• Supply and gas investments 19
• Trade flows 21
• Pricing 30
• Emissions 34
• Development trends of low carbon gases 38
• The historical evolution of energy policy priorities through the
energy trilemma lens 41
2 / Looking to 2030 and beyond - assessing the assumptions about
future gas demand and outlook 45
• Highlights 46
• Uncertainty in future gas demand scenarios 47
• Natural gas investments still crucial in the long term 50
• Most scenarios call for higher natural gas production 51
• Future balances of trade flow 53
• Addressing uncertainties in future gas policies 55
• Case study: Role of gas in China's energy transition 58
3 / Natural gas and low carbon gases in the energy transition 61
• Highlights 62
• Gas decarbonisation framework 63
• Energy and gas demand conservation considerations 64
• Gas as flexible and dispatchable source of power 65
• Case study: Future role of dispatchable sources in renewable grids 67
• Case study: The use cases for BESS systems 68
• Capacity assurance mechanisms demanded for energy stability and
reliable power grids 70
• Possibilities with renewable and low carbon gases 71
• Reutilising natural gas-fired power generation infrastructure for
low carbon gases 76
• Critical role of gas in heavy industries 76
• Transiation of the building sector 78
• Methane emission reduction initiative 80
4 / LNG as a critical conduit for an orderly energy transition 82
• Highlights 83
• The role of LNG in future energy systems 84
• Small-scale LNG for increased energy accessibiity 84
• Flexible LNG to balance out troughs 86
• Repurposing exisiting LNG infrastructure for clean and
low carbon alternatives 88

Executive Summary
2022 became the most turbulent year in the history of the gas industry, marked
by unprecedented supply and price shocks. In 2023, as supply remains tight and
demand outlook uncertain, the market entered an “unstable” equilibrium,
remaining highly sensitive to any movements on either supply or demand side.
The energy trilemma has come into sharp focus and Asia offset by strong growth in North America.
when the world was reminded that energy Falling demand in the regions hit hardest by the
security and affordability are necessary to stay energy crisis persisted during H1 2023 and was
on the course of the energy transition. Prior to primarily driven by industrial slowdown and
the crisis, the policy focus was positively on decreased heating demand caused by a mild
sustainability; however, it was also deprioritising winter in the northern hemisphere. Although
security and affordability, as those two seemed to be global demand dropped by 1.5% in 2022, regional
assured at the time, until they returned to become demand destruction was a lot more pronounced.
the priority in 2022. As evidenced by growing coal Europe’s gas demand decreased by almost 12%
use and emissions, sustainability cannot be fully in 2022 year-on-year, in response to the supply
realised without the pillars of security and and price shocks coming on the heels of the
affordability, and therefore all three need to be in Russia-Ukraine war. The good luck of a very mild
balance. Natural gas, low carbon, and renewable 2022-23 winter was a major contributor to Europe’s
gases are crucial contributors in this sense, as they reduced gas demand, together with significant
enable development and industrialisation in losses in industrial demand, gas to coal switch, and
developing regions, enhance sustainability by renewables uptake. Spikes in international spot
addressing air quality problems from coal use, LNG prices caused the demand in Asia to fall by
make the grids more resilient to support massive 18 Bcm (1.9%) in 2022 compared to 2021. Significant
scale-up of renewables, and foster competitive demand destruction also happened in South Asia,
industry decarbonisation. For regions looking to where the price of LNG became unaffordable,
transition to renewables in the short term, gas and its causing switching to coal wherever possible and
infrastructure serve as key flexible and dispatchable leading to shortages and blackouts. For instance,
sources tackling long-term intermittency, enhancing Pakistan and Bangladesh saw a 12% and 15%
the reliability of grids. reduction in gas demand, respectively. On the
contrary, North American gas demand grew by 4.8%
Global gas demand decreased by 1.5% in 2022 or 49 Bcm year-on-year in 2022, a notable increase
compared to 2021, with large declines in Europe driven primarily by increased gas-fired power
Figure 1: Global gas demand, split by region Figure 2: Global gas demand sector year-on-year
change, split by region (2021 – 2022)
Bcm
Bcm
4,500 4,055
3,995 60 49
3,931 3,836
4,000 1%
4% 1%
1% 4% 40
4% 1% 4%
4% 4%
4%
3,500 4%
12% 11% 20
11% 11%
5 3
3,000 2
14% 12% 0
14% 14%
2,500
14%
15% 15% -20 -10
15% -19
2,000 -23
-40
24% 24%
1,500 23% 23%
-60
1,000 -66
-80
27% 28% 26% 28%
a
500
ia
e
ia
a
st
a
a
si
p
As
ic
ric
ic
l
Ea
ra
us
ro
er
er
Af
st
Eu
R
Am
e
Am
Au
dl
0
id
h
th
ut
or
2019 2020 2021 2022

So
N
North America Asia Middle East Europe Power Industrial Residential Others
Russia Africa South America Australia Commercial Heat Transportation Fuel Gas
Source: Rystad Energy Source: Rystad Energy

Executive summary
generation as well as residential and commercial The commencement of the war in Ukraine in
applications. The North American market prices 2022 created a perfect storm causing gas
remained largely isolated and affordable, due to its prices to rise to the highest record ever, as the
predominantly regional nature with domestic world struggled to allocate the scarce gas
production. Looking at 2023, from January to supply. Gas prices experienced multiple record
August, the European Union (EU) saw a cumulative spikes after the onset of the war and triggered a
gas consumption decrease of roughly 10% year-on- cascade of geopolitical and energy sector
year (both an effect from industrial slowdown and responses. The situation was further impaired
the EU’s intentional switch from gas to other energy with the explosion of the Nord Stream pipeline in
sources), while China saw gas demand grow by September 2022. The peak gas price was seen in
5.4% year-on-year during H1 2023. late August 2022, when prices reached an all-time
high as the Netherlands-based Title Transfer Facility
Global gas production in 2022 stayed flat in (TTF) closed at around 90 USD/MMBtu and Asian
comparison to 2021 with a marginal 8.3 Bcm uptick, spot LNG prices surged past 60 USD/MMBtu.
which is less than a 0.5% increase year-on-year. Asian prices consistently traded below the TTF,
The first half of 2023 saw a mild revival in global thanks to a combination of factors that includes
gas supply, yet the final annual result remains fluctuating demand due to Covid-19-related
uncertain. Looking back at 2022, curtailment of lockdowns in China, price-induced demand
Gazprom’s output in Russia was offset by supply contraction in the south, southeast regions, and
growth in North America, which grew from 1,160 fuel-switching.
Bcm to 1,213 Bcm, and in the Middle East, which
grew from 670 Bcm in 2021 to 687 Bcm in 2022. In Gas prices have cooled in 2023, largely due to
Europe, incremental production in 2022 largely came demand-side adjustments in Europe and Asia, yet
from Norway, which has been maximising output they remain above pre-covid and pre-energy crisis
(7% growth year-on-year) to increase exports to the levels. The shortage of global supply, which was
rest of the continent. In Asia, gas production rose the key reason behind last year’s shocks, is still
modestly from 696 Bcm in 2021 to 712 Bcm in 2022, there: the market is in a state of a fragile and
driven mainly by higher production in China and unstable equilibrium. This cooling has been driven
Central Asia. By contrast, Africa experienced falling by demand contraction, marginal supply growth
gas production of 1% (2.9 Bcm) between 2021 and and infrastructure debottlenecking. Nonetheless,
2022. Europe's growing dependence on LNG has rendered
global gas prices increasingly vulnerable to global
2022 witnessed unparalleled turmoil in gas LNG supply risk, as shown during recent price
prices. Since late 2021 gas prices had been movements due to the strikes in Australia. At the
elevated and volatile, and trade balances tight. time of writing, the new development, and the
Figure 3: International gas prices
USD (real) per MMBtu
120 Reports of sabotage on the Nord

Stream pipelines and threats to energy
infrastructure as Europe roiled under
100
concurrent heatwaves
Onset of Russia-Ukraine war

80 heightens concerns over
Russian pipeline supply
60 2022
40
20
0
9
20
20
M 1
21
22
22
M 3
23
9
3
1
l -1
l -2
l -2
l -2
l -2
-1
-1
-1
-2
-2
-2
-2
-2
-2
-2
-2
-2
-2
-2
p-
p-
p-
p-
p-
n-
n-
n-
n-
n-
ay
ay
ay
ay
ay
ov
ov
ov
ov
ar
ar
ar
ar
ar
Ju
Ju
Ju
Ju
Ju
Se
Se
Se
Se
Se
Ja
Ja
Ja
Ja
Ja
M
M
N
Henry Hub LNG Northeast Asia TTF
Source: Rystad Energy; Argus (LNG Northeast Asia)

Executive summary
ongoing escalation of the conflict in the Middle East

is sparking further price volatility and tension in the Figure 4: Global energy emissions, split by energy
market, highlighting once again how in a general source
context of tight markets, gas hub prices are highly
Megatonnes CO2 eq.
sensitive to geopolitical turmoil and supply dynamics.
50,000
LNG has been crucial in navigating through the 45,000 41,982 42,029
41,815 41,562
gas market crisis, playing a key role in offsetting 40,000
40,004
40,845
8% 8%
39,925
9% 9%
8%
the shortage in Europe, with trade growing by 8% 9%
35,000 17% 17%
4%. Over H1 2023, global LNG exports saw a 4.1% 16% 17%
18%
18% 17%
year-on-year increase, despite volatilities due to 30,000
facility maintenance and outages during the 25,000

35% 35% 34% 34%
36% 36%
Northern hemisphere summer months. In the 20,000
34%
context of the globally tight LNG supply, while it was

15,000
instrumental in keeping the lights on in Europe, the
unaffordable prices left some countries in Asia in the 10,000
40% 39% 39% 39% 39% 40% 40%
dark. In 2022, Europe’s natural gas imports 5,000
shifted from Russian pipelines towards LNG 0
leading to a 69% increase in its LNG imports, 2016 2017 2018 2019 2020 2021 2022
reaching 124 million tonnes (169 Bcm) and making Coal Liquids Gas Others
Europe the biggest importing market, absorbing a

significant share of the global LNG volume by Source: Rystad Energy
outbidding other customers. Roughly two thirds of
the additional volumes (~30 million tonnes) came Total global energy CO2 emissions in 2022
from the United States. In Asia, China reduced LNG continued an upward trajectory with a 1.1% yearly
imports from Australia and the United States by a growth, reaching another record. Emissions from
total of 21 million tonnes, while it increased combustion of natural gas saw a minor decline in
imports from Qatar by approximately 7.4 million 2022, totalling about 7.2 giga-tonnes CO2-e, partly
tonnes. In September 2023, there was disruption in attributed to price spikes which incentivised
gas supply from Australia due to rolling strikes, gas-to-coal and gas-to-oil switching. An all-time
work bans and stoppages at the Gorgon and high in emissions from coal was reached at about
Wheatstone LNG facilities, potentially affecting 16.8 giga-tonnes of CO2-e, despite worldwide
around 5% of global LNG production, impacting initiatives to diminish dependency. 2022 and 2023
volatility and level of international gas price continued the decade-long trend with coal having a
indexes. 40% share of global power sector emissions, while
Figure 5: Global carbon pricing map
Canada’s Carbon
Tax:
48 USD/ tCO 2e
*~125 USD/ tCO 2e

by 2030 EU ETS: ETS and carbontax implemented
60 USD/ tCO 2e
ETS or carbon tax under
consideration /development
ETS implemented other pricing under
USA’s Carbon ETSimplemented
Tax:
12 – 30
USD/ tCO 2e Carbon tax implemented
*No federal Carbon tax implemented, ETS under
carbon tax but consideration /development
some states
impose their
own taxes
Argentina ’s Carbon Tax:
Chile’s Carbon Tax:
3 USD/ tCO 2e
5 USD/ tCO 2e Australia (Safeguard Mechanism ):
11 USD/ tCO 2e
Source: Rystad Energy; World Bank

Executive summary
the global economic engines and major energy gas production level is expected to reach about
consumers like China and India increased their coal 4,100 Bcm in 2023. These output volumes are
usage and approved new coal plants to mitigate projected to decline to about 3,100 Bcm in 2030
energy security risks. Coal usage growth shows due to asset maturation and natural decline. The
the importance of stability in global gas markets in projection indicates a further decline to 1,850 Bcm in
minimising emissions. In H1 2023, lower gas prices, 2040, followed by a decrease to just under 1,000 Bcm
nuclear recovery, and power production from in 2050.
renewable energy sources have reduced coal
consumption and emissions, especially in Europe. Amidst the energy transition targets and shifting
supply dynamics, decarbonisation policies have
Analysis of future potential trajectories of global been disproportionately focused on the supply
gas demand from a wide range of existing side, while energy conservation and demand-
energy transition outlooks towards 2030 and response have been overlooked as powerful
beyond reveals unprecedented uncertainty and tools for emissions reduction through reducing
illustrates that continued investments in the overall energy usage. Proactive demand management
natural gas value chain are needed to cope planning will promote a more efficient use of energy
with natural supply decline, global demand and simultaneously reduce tightness of the global gas
dynamics, and likely growth in several regions. market by reducing gas demand in an economically and
Gas demand scenarios have important implications industrially sustainable way, while efforts to bolster
for policy decisions, as the supply will need to be supply through optimisation must occur in parallel.
developed ahead of demand. For this reason, These actions can improve resource availability,
comprehensive and balanced energy planning is shore up energy security, and stabilise the energy
needed to avoid further supply crises. Otherwise, the landscape. Measures fall into “preventive” and
required natural gas supply may not be developed to “reactive” categories, respectively managing
meet demand resulting in heightened emission levels consumption proactively and responding swiftly to
and increasing frequencies of blackouts. Restoring a periods of resource constraints or grid stress.
sustainable balance in the global gas market is
imperative and requires addressing the existing The acceleration of low carbon gaseous energy
supply shortfall, an outcome of a prolonged is an essential building block of the energy
under-investment period. Investment levels in gas transition. Abated natural gas with CCUS, green
supply development have been reduced by 58% in and blue hydrogen (including derivatives like clean
the period between 2014 and 2020, and only started ammonia), biomethane and e-methane, will play an
to marginally recover in 2021. Without additional increasingly significant role in an achievable and just
injections, the current total existing and approved transition, offering a viable decarbonisation option in
Figure 6: Global gas demand scenarios from various institutions versus operational, approved and
discovered assets (2010 – 2050)1
Bcm
6,000
IEEJ
Reference Case
5,000 Rystad Energy
2.2-degrees
4,000 Stated Policies

(2022)
Rystad Energy
3,000 1.9-degrees
Announced Pledges
(2022)
2,000
Rystad Energy
1.6-degrees
1,000 Net Zero
(2022)
Rystad Energy
0 1.5-degrees
2010 2015 2020 2025 2030 2035 2040 2045 2050
Abandoned Producing Under development Discovery
Source: IEA; IEE Japan; Rystad Energy

1
All historical and forecasted values are scaled to be identical in 2022 to account for different heating and caloric assumptions.

Executive summary
many applications such as power generation,

reactant/feedstock need, heating, and heavy Figure 7: Clean hydrogen cumulative capacity by
transport, provided they are accessible in sufficient status, including pre-FID projects (2010 – 2030)2
quantities and are cost-effective. During the
Million tonnes of Blue /Green H2
transition, blending can be performed between
methane and low carbon and renewable gases, to 50
reduce emissions. Although there is momentum in 45

low carbon and renewable gas supply growth, 40
reinforced significantly by the energy crisis and
35
ambitious new energy transition policies, the scale of
current supply projects remains minimal in contrast 30
to the pressing need to accelerate production and 25

infrastructure availability. At the end of 2022, the 20
global supply capacity of low carbon hydrogen stood
15
at 3.2 million tonnes per annum (MTPA), with most of
the capacity coming from blue hydrogen, and 10
biomethane stood close to 7 Bcm. However, recent 5

policy introductions, such as the Inflation Reduction 0
Act (IRA) in the United States and the European 2010 2015 2020 2025 2030
hydrogen bank, have improved the economic viability Operational FID/Under Construction Pre-FID
of all hydrogen types, supporting the acceleration of

desired hydrogen supplies. Europe and the United Source: Rystad Energy
States maintain their leading positions in biomethane
production, producing about 6.1 Bcm combined as of intermittent renewable energy sources, their
September 2023 – Europe has ambitions to increase grids can also be balanced with dispatchable gas
biomethane production to 35 Bcm by 2030, generation. In Africa, even regions with high levels
compared to 2021 level of around 3.5 Bcm. of access have weak and unstable grids, frequently
Meanwhile, China’s biomethane capacity buildout suffering from outages. These electricity grids
has fallen short of projections. CCUS is expected to would require additional reinforcement and flexible
grow sevenfold, from around 50 MTPA in 2023 to capacity to integrate large-scale renewables without
370 MTPA by 2033. risking a collapse.
The growth of renewable energy sources within China is the largest energy consumer in the world
the power mix is directly correlated with a growing and is expected to remain a natural gas demand
need for reliable, dispatchable, and flexible powerhouse, as gas represents a key pillar of
capacity resources to balance grids during periods its decarbonisation policy - forecasting that gas
of renewable energy sources intermittency. imports will make up a significant share of its
Gas-fired generation is a critical source of long- future gas needs. In 2022, natural gas represented
duration flexibility, as opposed to short-term 8% of China’s energy mix while coal supplied 56% of
balancing which can be effectively delivered through the country’s energy consumption. China plans to
batteries. Gas is the most cost-effective grid increase natural gas’ share in its energy mix
resilience resource, and high renewable energy significantly. Natural gas power generation is
sources capacity additions will likely require pairing expected to increase alongside renewable energy
with gas-fired generation capacity to maintain grid generation, from 0.3 PWh hours in 2022 to 0.6 PWh
security. The level of gas-fired generation would vary, in 2030 and 0.8 PWh in 2040. The additional gas-fired
based on the pace of the energy transition in capacity acts as a backup and dispatchable energy
different countries and regions. Emerging source in the event of a shortage of renewable power
economies, such as those in Africa where general generation, enabling China to call on a stable source
energy poverty is still high, and in Asia where coal of energy with quick ramp-up capability. China’s
plants still dominate, gas presents a stable and existing gas-fired power generation capacity of
sustainable alternative to energise economies while 115 GW is primed to nearly triple by 2040 to 330
lowering the carbon intensity of the grids. When GW, which will equal to around 380 Bcm of gas per
these countries move towards adoption of annum.
2
Most blue and green hydrogen capacities are located in China, Saudi Arabia, and the United States of which approximately
96% involve green hydrogen. One-third of the pre-FID pipeline is blue hydrogen, which signals a call for further natural gas
demand. Given the substantial size of the pre-FID pipeline and the gradual pace of FID decisions, the progress of low carbon
hydrogen projects has been relatively slow.

Executive summary
Effective capacity assurance mechanisms will be accessibility. The dynamic distribution modes of
imperative to sustain a rapid and orderly energy LNG, centring primarily around shipping, but also
transition, requiring planning and market increasingly trucks in smaller-scales, function as
attributes to promote the stability of electrical "virtual pipelines", supplying developing regions and
grid development. Capacity mechanisms, akin to remote areas where piped gas is not a viable option.
insurance for grid stability, are designed to ensure This often reduces emissions and improves air
adequate supply being available to meet demand quality due to the replacement of higher-emitting
peaks. Short-term capacity mechanisms compensate sources like coal and gasoil. The flexibility of LNG
electricity generators for being available in reserve has been displayed on numerous occasions -
and on-call, even if not always operational. Long-term particularly during the war in Ukraine, when the
mechanisms can involve central planning and United States increased its exports to Europe by
procurements, or market-based capacity auctions to 159% from 2021 to 2022. LNG is effective at
secure investment for future supply in anticipation of democratising energy in developing regions and
demand growth needs. The latter is particularly in remote areas with scarce natural resources. The
important because of the long lead time required for adoption of small-scale LNG (ssLNG) bears lower
building new electricity generation and network capital investments and shorter lead times, offering
infrastructure that cannot react quickly enough to new opportunities for the gas producing areas of the
real-time market signals. world.
LNG has unmatched scalability and flexibility, New infrastructure investments should be
which makes it fundamental as a critical global designed to ensure compatibility with low carbon
enabler of resiliency through the energy and renewables gases. Future proofing investments
transition. The surging share of renewable energy in gas and LNG infrastructure will ensure project
coming through the energy transition will longevity, guaranteeing long-term asset use in
intensify the need for responsive and dispatchable parallel with the growing adoption of low carbon and
balancing sources, with natural gas, and low carbon renewable gases. For instance, biomethane and
and renewable gases playing a key role for long synthetic methane can be liquified and can leverage
intermittency and peak periods (while batteries are existing natural gas infrastructure. The potential of
expected to fulfil most of the balancing needs for utilising existing LNG infrastructure for liquid
shorter duration periods). In addition to the hydrogen carriers like ammonia or liquid hydrogen
dispatchable characteristics of natural gas, its is gaining traction with rising investments and R&D
conversion to LNG introduces scalability and efforts.

1 / Review of the most
turbulent year in
the history of gas
1 / Review of the most turbulent year in the history of gas
2022 brought about a seismic shift in the global continuing into September 2023. The global gas
gas market, predominantly due to the dramatic market has sustained through the 2022 emergency
reduction of Russian pipeline gas exports to Europe. and is now in the second half of 2023 entering into
Gas prices in Europe and Asia soared to historic a phase of unstable equilibrium – prices remain
highs, with a significant surge in European LNG elevated and highly fragile, but much lower than
demand pushing prices above those of Asian what was observed in 2022.
benchmarks, thereby establishing them as the
highest ever recorded worldwide. Domestically, In this chapter, we delve into the developments that
at the wholesale level, natural gas prices were at unfolded from the second quarter of 2022 until
historic highs in all regions except North America September 2023, offering a comprehensive overview
and Russia. 2022 proved to be a year that would and analysis of the forces at play and their impact on
leave a lasting mark on the gas sector, with trends the global gas market.
Highlights
• Global gas demand was 3,995 Bcm in 2022, having decreased by about 60 Bcm or 1.5% year-on-
year, mainly due to prices spiking. The first half of 2023 saw mixed demand signals with growth
mainly driven by the United States and China, offsetting major declines in Europe and other parts
of East Asia. In 2022, reduced Russian supply, amidst an already tight market which was set in 2021,
led to record price hikes causing increasing fuel switching and industrial shutdowns, thereby reducing
demand. Growth in renewable energy and a dip in gas use for heating and cooling thanks to milder
weather conditions in 2022 further reduced overall gas demand.
• Global gas production in 2022 was relatively flat, increasing by about 8.3 Bcm or less than 0.5%.
The first half of 2023 saw a mild revival in the global gas supply, yet the net result of the year is still
uncertain. The flat development in 2022 was primarily driven by significant reductions of about 87.2 Bcm
in Russian gas production, offset by substantial increases in North America of about 53.1 Bcm.
Table 1: Key year-on-year changes in global gas market from 2021-2022
Consumption Production Gross imports Gross exports
Regions Bcm % change Bcm % change Bcm % change Bcm % change
Asia 18.9 2.0% 16.4 2.4% 33.2 7.1% 6.7 3.9%
Europe 66.1 11.9% 8.6 3.8% 59.0 11.5% 79.8 38.8%
North America 49.4 4.6% 53.1 4.6% 2.9 1.7% 13.1 5.0%
South America 10.4 6.6% 4.1 2.8% 14.5 35.9% 1.6 5.6%
Africa 5.2 3.1% 2.9 1.1% 1.8 13.5% 6.7 6.4%
Middle East 2.6 0.4% 16.9 2.5% 8.1 7.7% 5.5 3.2%
Russia 23.3 4.9% 87.2 12.3% 7.0 46.5% 86.4 34.2%
Australia 1.7 3.3% 0.7 0.4% 0.0 0% 0.7 0.6%
World 59.8 1.5% 8.3 0.2% 0.9 0.1% 0.9 0.1%
Source: Rystad Energy

• 2022 saw a steep reduction in available pipeline gas in Europe, resulting in an approximate 65%
increase in LNG imports to compensate for lost volumes, with this trend continuing into 2023. Abrupt
changes of Russian pipeline flows triggered fierce competition for supply, mainly between Europe and
Asia, causing prices to spike to all-time highs. In Europe, the sudden increase in LNG imports led to
regasification facilities being overutilised over extended periods and significant inter-regional price
differentials caused by infrastructure limitations. On the exporting side, final investment decision (FID)
activity, especially North America, showed strong growth in liquefaction facilities for further exports.
Considering REPowerEU’s requirement to maintain minimum gas storage stocks, Europe saw robust
growth in gas storage buildup, remaining strong in September 2023. Globally, LNG SPA contracts signed
in 2022 demonstrated a sustained emphasis in the market on long-term commitments, while Europe
continued to prefer short-term mechanisms.
• In 2022, gas prices reached unprecedented levels and exhibited extreme volatility, with the TTF and
LNG Northeast Asian peaking at around 90 USD/MMBtu and 60 USD/MMBtu respectively. Although
volatility has toned down in 2023, the TTF still registers roughly three times higher average prices and
five times higher average volatility compared to pre-covid and pre-energy crises levels in 2019.
There was a visible deviation between gas prices in some regions due to infrastructure constraints in
moving the gas from abundant areas to those in demand. The soaring gas prices seen in 2022 inflicted
severe damage on numerous sectors, resulting in industrial shutdowns, economic downturns, and power
blackouts, with the consequences still being felt in September 2023. Gas prices remain fragile with limited
supply coming on stream in the coming years.
• Due to the high gas prices in Europe and Asia, the economic attractiveness of coal improved in 2022,
resulting in increased consumption through gas-to-coal switching and a corresponding growth in
emissions. Europe’s and Asia’s coal consumption for power generation increased by 1.3% and 2.6%,
respectively. The price spikes in Asia and Europe caused the Asian spot and TTF to raise above their
respective gas-to-coal-switching bands for the majority of 2022, making coal a lot more attractive. In the
context of power, coal consumption increased even as overall power consumption declined. Subsequently,
the emission intensity of global power production increased in 2022. This occurred despite record growth
in renewables generation, without which the increase would have been even worse. Leading up to
September 2023, the economic justification for coal switching in Asia and Europe has weakened as gas
prices have decreased.
• While low carbon gases are still small in scale, growth has been improving, albeit still falling
significantly behind the needed decarbonisation trajectory. Thus, aggressive action is required to
scale up the supply of low carbon gases if the said targets are to be met. Globally, policies have been
improving the economic viability of all hydrogen types, although green hydrogen is generally the most
favoured by policy support measures. While green hydrogen saw its nameplate capacity double, blue
hydrogen saw limited growth considering spiking natural gas prices. Europe and the United States maintain
their leading positions in the renewable natural gas or biomethane production, whereas China’s capacity
buildout falls short of general projections. In September 2023, biomethane accounted for approximately
0.2% of the natural gas global market share, which falls significantly short of the potential.
• The supply shock coming out of the Russia-Ukraine war reminded the world about the need to re-focus
on energy security and underscored the need for reliable and diversified energy sources. Moving
forward, a more integrated approach on the three dimensions of the energy trilemma is essential.
The developments observed in 2022 and the first half of 2023 demonstrate that when energy security and
affordability are compromised, short-term crisis response measures prioritise security over sustainability.
Hence, gas emerges as a key energy source needed to balance the energy trilemma towards an equilibrium
encompassing all three dimensions: security of supply, sustainability, and affordability. Not only is gas
abundant and affordable when timely investments are made, but it also has a lower carbon footprint than
other fossil fuel alternatives even when unabated. Moreover, the gas system can be further decarbonised
with the use of carbon capture and with the scaling of biomethane and other low carbon gases.

Developments in gas demand

Figure 8: Global gas demand, split by demand Figure 9: Global gas demand, split by region
sector
Bcm
Bcm
4,500
4,055 4,500 4,055
3,931 3,995 3,931
3,995
4,000 3,836 3% 3,836
3% 3% 3% 4,000 1% 1%
3% 3% 1% 4%
3% 5% 4% 1% 4%
4%
5% 3% 4% 4% 4%
3,500 5% 6% 6% 3,500
4%
4%
6% 6% 12%
7% 8% 11% 11%
8% 11%
3,000 8%
3,000 14% 12%
15% 15% 14% 14%
14% 15%
2,500 2,500
15% 15%
14% 15%
2,000 28% 27% 2,000
27% 28%
1,500 24% 24%

1,500 23% 23%
1,000 1,000
34% 34% 34% 34%
27% 28% 26% 28%
500 500
0 0
2019 2020 2021 2022 2019 2020 2021 2022
Power Industrial Residential Others North America Asia Middle East Europe
Commercial Heat Transportation Fuel Gas Russia Africa South America Australia
Global gas demand decreased by renewable energy and a dip in exports to Europe of about 87.2
about 60 Bcm (1.5%) overall in gas use for heating and cooling Bcm and 79.8 Bcm respectively.
2022 compared to 2021, although in many parts of the world due
still being above the pre-Covid to mild weather conditions. In Despite a relatively stable gas
year 2019. The main drivers of terms of prices, the TTF gas price demand sector mix on a global
the decrease were increased gas- reached an all-time high in 2022 scale in 2022, regional changes in
to-coal switching and industrial of about 90 USD/MMBtu, mainly gas consumption from 2021 were
shutdowns in response to higher attributable to significant reduc- evident. The demand decline in
prices, coupled with growth in tions in Russian production and 2022 was particularly pronounced
Figure 10: World map coloured by regions
Russia
Europe
North America
Africa Middle East

Asia
South America
Australia

Figure 11: Gas demand sector mix in 2022, split by Figure 12: Global gas demand sector year-on-year
region change, split by region (2021 – 2022)
Percent of total demand Bcm
100% 60 49
90%
40
80%
70% 20
5 3
2
60%
0
50%
40% -20 -10
-19
-23
30% -40
20%
-60
10%
-66
0% -80
a
a
a
a
a
ca
lia
t
e
ca
lia
t
si
a
si
a
i
s
ic
op
i
ic
op
As
As
Ea
ic
Ea
ic
us
tra
ri
us
tra
er
ri
er
er
r
Af
er
r
Af
Eu
R
Eu
Am
R
s
Am
e
s
Am
e
Am
Au
Au
dl
dl
id
id
th
th
th
th
M
M
u
u
or
or
So
So
N
Power Industrial Residential Others Power Industrial Residential Others

Commercial Heat Transportation Fuel Gas Commercial Heat Transportation Fuel Gas
in Europe, caused by market mediary goods. Consequently, by gap was partially met by robust
disruptions resulting from the mid-2022, Germany’s chemical growth in non-hydro renewa-
Russia-Ukraine conflict. Further, industry reportedly, according bles, coal switching, and the mild
Asia's previously robust growth to the European Central Bank, winter temperatures, resulting in
trajectory saw stagnation, primar- began importing ammonia instead unchanged gas demand for power
ily caused by elevated gas prices of producing it domestically. in 2022.
and subsequent demand destruc- Furthermore, Europe’s extensive
tion. By contrast, North America gas distribution networks for The substantial reduction in gas
saw a notable increase in year-on- residential and commercial build- demand observed in Europe
year gas demand in 2022. ings saw a substantial decrease during 2022 raises the question: is
in gas demand, accounting for the decline fleeting or indicative
Europe saw the steepest demand about 55.6% of the region’s total of a lasting trend?
reduction globally in 2022 of demand contraction. According to
about 66.1 Bcm, equalling a 12.0% the IEA, over 60% of the decrease Although some price-driven
contraction from 2021. The major in residential and commercial trends such as industrial shut-
drivers of this reduction were re- buildings can be mostly attribut- downs are reversible, 2023 Sep-
duced industrial consumption and ed to mild winter temperatures, tember shows no clear indication
decreased residential and com- while the adoption of about 2.8 of recovery in the gas demand by
mercial usage. Although industrial million heat pumps coupled with Europe’s biggest consuming na-
consumption is typically stable, increased use of electricity to heat tions, even though the cost situa-
elevated gas prices in 2022 caused buildings reduced the gas demand tion has improved, and prices have
industry shutdowns in Europe, by an additional estimated 1.4 retreated. However, the prices
accounting for about 41.5% of the Bcm. Despite increased electrici- remain above pre-crisis levels and
region’s total demand contrac- ty-based heating, Europe’s power fear of returned volatility is still
tion. For instance, in September sector faced a compounded present. Gas consumption in the
2022, Yara International, a Nor- supply challenge in 2022. In addi- EU from January to August 2023
wegian chemical company and a tion to the gas supply constraint was around 215 Bcm, a reduction
major global fertilizer producer stemming from Russian pipeline of about 25 Bcm from the same
announced reductions in ammonia curtailments, Europe experienced period in 2022. When compared
production in Europe due to rising a drop in nuclear power gener- with EU’s pre-crisis gas consump-
gas prices. Additionally, some in- ation due to facility downtime, tion in the first eight months in
dustrial players adopted the strat- as well as limited hydropower 2021, the decrease is even more
egy of switching from producing generation. These factors togeth- significant, totalling over 53 Bcm.
themselves to importing cheaper er created significant stress in However, it is still too early to
finished commodities and inter- the power sector. Regardless, the definitively determine whether

Figure 13: EU27 monthly gas consumption
Bcm
70
60
50
2022
40 EU gas consumption continued to
Min/Max
trail 2022 figures
2019 - 21 range
30
20 2023 consumption has consistently

been below the 2019 - 21 range 2023
10
0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Source: Eurostat; Rystad Energy
the reduction represents a Russia's natural gas demand for Pakistan faced issues related to its
permanent shift in demand. power generation can primarily older oil-fired power plants, which
There is a high degree of be attributed to the expansion of are less efficient and more costly
uncertainty surrounding whether nuclear energy and the develop- to operate compared to newer
the decreased demand is solely ment of various renewable energy gas-fired plants, while Bangladesh
driven by pricing factors, or if it sources. faced constraints due to short-
signifies a more enduring trend. ages in alternative fuel sources.
Nevertheless, the evidence In Asia, gas demand fell by about Ultimately, these challenges
observed up until August 2023 2.0% from 963.3 Bcm in 2021 to resulted in power blackouts in
indicates that there may be lasting 944.4 Bcm in 2022, mainly driven both countries, dealing a harsh
changes in gas demand. by high LNG prices, prolonged blow to their economies and living
pandemic-related lockdowns conditions.
Russia too saw a demand reduc- in China, and a milder winter in
tion of 23.3 Bcm or 4.9%, largely Northeast Asia. The high LNG In China, continued lockdown
attributed to a mild winter3. As prices, driven by a surge in LNG measures and reduced gas
seen in Figure 12, Russia’s gas con- demand in Europe to replace demand from price-sensitive
sumption mix stands out since its Russian piped-gas supplies, industrial players resulted in a
heating relies heavily on gas-pow- triggered demand destruction of decline of natural gas demand
ered centralised heating systems. LNG in Asia. It pushed countries by 0.8% from 370 Bcm to
Although Europe and parts of Asia with relatively weak purchas- 367 Bcm, which is the first drop
have similar systems in operation, ing power, like Bangladesh and in gas demand in 30 years.
most regions apart from Russia Pakistan, to attempt to switch to Furthermore, the mild winter in
predominantly rely on electricity highly emitting energy sources Northeast Asia reduced space
and distribution of piped gas and like fuel oil and coal, resulting in a heating requirements and
local heat boilers for heating. 12% and 15% reduction in gas dampened gas consumption,
Consequently, during the warm demand, respectively. This contributing to the overall decline
winter of 2022, Russia was the challenge persisted from 2022 in Asia’s gas demand. Recent
only affected region to see and continues into September developments in Asia have
significant reductions in gas 2023, particularly in meeting signalled possible divergence
usage for such heating purposes, power demand. Although Pakistan between policies supporting
accounting for about 71.1% of and Bangladesh contemplated growth in coal to gas switching
the region’s total demand turning to alternative fuels to and the continuing expansion of
contraction. The decline in sustain power generation, coal. In 2022, China approved a
3
Transparency on Russian figures have been reduced post the onset of the Russia-Ukraine war, yet Rystad Energy believes
the fall is real and attributable to heating and power.

record-breaking 86 GW of new lockdowns. China’s total LNG and increase driven primarily by in-
coal-fired plants, while other pipeline imports increased by creased utilisation of gas for pow-
countries like Pakistan pledged 5.8% from 2022, reaching 76 Bcm. er generation as well as residential
to quadruple its coal-fired Nonetheless, its imports are still and commercial applications. In
generation from 2 GW in 2022 to lower than the 81 Bcm pre-crisis the power sector, this was largely
10 GW by 2030. This would level in the first half of 2021, due due to the retirement of coal-
undermine energy transition to China’s efforts in boosting fired plants, relatively higher coal
targets like “peak emissions domestic gas production and prices, and below-average coal
2030” for China and “50% a mild economic rebound. In stocks. Consequently, there was a
reduction of emissions by 2030” contrast, Japan saw gas noticeable shift towards increased
for Pakistan, which require gas consumption and LNG imports utilisation of gas for power gen-
to progress towards decarbonisa- decreasing 9% to 48 Bcm in 2022 eration. Additionally, the United
tion goals, and at the same time and 14% to 33 Bcm year-on-year States experienced record-high
meet industrialisation needs. This in the first half of 2023. In 2021, temperatures in summer of 2022,
has resulted in much uncertainty before the Russia-Ukraine crisis, boosting power demand for cool-
surrounding Asia’s future gas Japan’s LNG imports amounted ing. In the residential and com-
demand and the overall energy to 53 Bcm. The drop from 2022 mercial sectors, colder-than-aver-
landscape, as the switch back is attributable to Japan’s age temperatures in January 2022
to coal deviates away from expanded nuclear and solar resulted in increased demand
sustainability and could generation capacity and a high from gas boilers for space heat-
potentially set emerging 5.4 million tonnes inventory level ing in residential and commercial
economies in Asia back in terms by June 2023. Before the 2023/24 buildings. In 2023, the gas market
of industrialisation and risk winter season, Japan, and South experienced a dent in demand pri-
significant delays in local Korea plan to have an addition- marily in residential and commer-
decarbonisation efforts and al combined 6 GW of nuclear cial sectors for heating during the
global net-zero targets. capacity online, further softening mild winter in the northern hemi-
their demand for LNG due to less sphere. Conversely, there was also
In the first half of 2023, China dependence on gas-fired power a rise in electricity generation for
saw gas demand recovering and generation. cooling when heatwaves affected
growing at 5.6% year-on-year large parts of the same region. For
to reach 194 Bcm, largely North America’s gas demand by example, in the United States, the
attributable to fully reopening contrast grew by 4.8% or 49 Bcm gas consumption in the residential
its economy from the Covid year-on-year in 2022, a notable and commercial sectors dropped
Figure 14.1: Global power mix split by energy Figure 14.2: 2022 global power mix by region,
source split by energy source
TWh
40,000
35,000
28,662 29,305
27,476 27,346
30,000 0%
2% 0% 2% 2%
0% 0% 2%
2% 3% 2% 9%
2% 10%
25,000 10% 10%
13% 14%
10% 12%
20,000
16% 16% 15%
16%
15,000
23% 22% 22%
23%
10,000
5,000 36% 34% 35% 34%
0
2019 2020 2021 2022
Coal Gas Hydro
Renewables Nuclear Bioenergy
Liquids Other (non-renewable )

by 9% year-on-year to 3.2 Bcm and industrial sectors and remained largely stable
in the first quarter, while con- ongoing efforts to democratise between 2021 and 2022, even in
sumption in electricity generation energy and gas to bolster the face of a substantial increase
rose to 33.2 Bcm in June, a 2.3% economic development. In the in installed renewable capacity
increase from June 2022. Middle East, gas demand and gas-to-coal switching.
increased modestly from 612 Bcm Nevertheless, it is worth
South America’s gas consumption in 2021 to 615 Bcm in 2022, noting that regional disparities
reduced by 6.6% or 10 Bcm in driven by higher electricity persist, as seen in the chart
2022, from 159 Bcm in 2021, demand and improved gas supply above. As discussed in the
due to improvements in for power generation. Australia following chapters of this
hydroelectricity generation witnessed a slight uptick of 1.6 report, even in areas where the
conditions in Brazil and lower Bcm in gas demand, despite the power sector is expected to
demand from the industrial growth of renewables in the gradually transition to large-scale
sector amid high gas import power mix, as coal plant closures renewables, the dispatchability
prices. Conversely, Africa’s gas required gas to step up as a and flexibility of gas-fired
demand saw a 3.1% or 5 Bcm dispatchable source. power makes it an essential part
increase in 2022, compared to of the decarbonised power
167 Bcm in 2021, primarily due to In the context of the worldwide system, providing resilience and
increased needs within the power power mix, gas utilisation grid stability.
Supply and gas investments

Figure 15: Capex and Opex in global gas production (nominal upstream gas field-related expenditures)
Billion USD (Nominal)
300
250
200 Opex
150 Capex
100
50
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Turning to the supply side, we reduced investments in oil and gas with a growing policy uncertain-
examine the evolution in invest- as global oil prices declined signif- ty amidst the stronger focus on
ments in the cycle leading up to icantly, with abundant injections climate change mitigation. Many
the energy crisis starting in 2021. of supply into the market from operators faced elevated debt
There has been a pronounced the strong United States shale and lower profits, prompting
downward trend in upstream production that was bearing fruit cautious investment decisions
investment over the previous from investments prior to 2014. focused on cost reduction and
decade, setting in after the oil Then, from 2015 to 2019, capital capital discipline. This period led
downturn in 2014. expenditure stagnated due to to many companies introducing
the lingering aftermath of the oil cost saving programmes to reduce
The period from 2014 to 2016 saw and gas price drop accompanied expenditure and allocate capital

more efficiently. Without signifi- during this period continues to that E&P exploration budgets
cant cost reductions, this period contribute to high commodity have been revised down from
would have been much more prices and energy scarcity today. almost 160 billion USD in 2013
volatile in terms of energy costs. to around 65 billion USD in 2023,
Global average well costs fell The rebound helped expenditure both nominal figures. This is a
by more than 28% from 2015 levels to recover in 2021 and in troubling fact, because sustained
to 2021. Inflationary pressure 2022, capital expenditure on gas exploration and upstream invest-
in 2022 marked the first year of fields increased by 26%, attribut- ments are essential to rebalance
increasing unit costs, with average ed to both a high inflationary the energy market and restore se-
well costs growing by 8% year-on- environment and increased curity of supply, avoid production
year. economic activity levels. Capital shortages and price spikes and
costs have been rising due to to enable coal replacement, that
The decline in investments multiple supply chain pressures would otherwise limit and chal-
continued from 2019 to 2020, exacerbated by the crisis, tight lenge environmental goals and
largely due to the Covid-19 markets for specialised labour and reverse decarbonisation efforts.
pandemic. Uncertainties in future services, and the effect of higher Consequently, in a bid to improve
demand and policy directions energy prices on essential energy security, some countries
led to a frugal investment stance construction materials such as have committed to attracting
across industries, including steel and cement. upstream investment climate to
energy. This decline in investment increase its domestic production
levels in 2020 further compound- It is important to note that most of gas. Indonesia, for example, has
ed the previously observed trend of the current capital expenditure is announced an ambitious target to
of reduced investments since associated with expansion pro- increase its domestic gas produc-
2015. In 2020, a temporary reduc- jects rather than exploration in tion from 58 Bcm in 2022 to 124
tion in operational expenditure greenfield areas. Most operators Bcm by 2030. This is in line with its
can be attributed to the pandem- are still relatively cautious and un- goal to increase the share of nat-
ic’s disruptive effects. The willing to take on increased risks ural gas in the primary energy mix
recovery from the pandemic in associated with new exploration, from 17.8% in 2013 to 22.4% in
2021 and 2022 was marked by a due to ongoing energy transition 2025 and 25% in 2050, according
sharp rebound in industrial trends, uncertainty about accessi- to its National Energy Plan (RUEN).
activity, transportation, and ble financing and political risk, as The upstream regulator of Indone-
consumption of commodities, policies continue to be issued to sia, SKK Migas estimates addition-
including natural gas. Low invest- ban future use of natural gas. al annual upstream investment of
ment into the upstream sector Rystad Energy’s overview shows 18 to 20 billion USD to fulfil the
Figure 16: Global gas production, split by region Figure 17: Global gas production year-on-year
change (2021 – 2022)
Bcm Bcm
4,500 60
3,973 3,838 4,041 4,049
4,000 4% 4%
4% 4% 4% 4% 40
4%
6% 4% 7% 6%
3,500 53.1
6% 6% 6%
6% 6% 20
3,000 15%
18% 18% 16.9 16.4 4.1
16% 8.6
0
2,500
-0.7 -2.9
17% 17%
16% 17%
2,000 - 20
1,500 17% 18%

17% 17% - 40
-87.2
1,000
- 60
29% 29% 29% 30%
500
- 80
0
2019 2020 2021 2022
- 100
North America Asia Middle East Russia North Middle Asia Europe South Australia Africa Russia
Europe Africa Australia South America America East America

target. However, its fiscal regime North America conversely in- tion struggled to keep up with the
remains as one of the most creased production from 1,160 region's surging demand. Despite
complex and stringent in the Bcm to 1,213 Bcm, an increase of this development, imports will
world, with government take about 4.6% year-on-year. About continue to play a crucial role in
averaging between 60% to 72.8% of the increased North meeting demand growth in Asia.
75%, disincentivising foreign American production stemmed
investment to development its from the United States, where gas European production increased
gas resources. Policy alignment supply growth was largely driven by about 8.6 Bcm in 2022, an in-
between energy policies and by increased shale activity in the crease of approximately 3.8%. The
regulations underpinning invest- Permian, Haynesville, and Eagle incremental production primarily
ment climate is especially impor- Ford plays. Unlike Haynesville and stemmed from Norway, as the
tant for developing countries Eagle Ford, natural gas production country strategically ramped up
like Indonesia, which is still highly in the Permian is primarily the output, resulting in a remarkable
reliant on coal. The development result of associated gas produc- increase of over 9.2 Bcm (approx-
of gas resources provides a path- tion from oil wells. Haynesville is imately 7.5%) year-on-year. This
way to a more sustainable, secure, a strategic location for operators surge was aimed at augmenting
and affordable future, and aids to drill for natural gas because of exports to continental Europe,
its industrialisation for further the proximity to the Gulf Coast, effectively countering the de-
economic growth. where industrial demand and LNG cline in Russian supply. Increased
production and export terminals production permits issued by the
On a global level, gas production have been growing. Norwegian Ministry of Petroleum
remained relatively flat in 2022 and Energy allowed Equinor to
compared to the previous year. The Middle East saw the second maintain high production levels at
On the other hand, on a regional largest growth in gas production its Troll, Oseberg and Heidrun gas
level, 2022 brought a shock to in 2022, rising from 670 Bcm in fields, increasing production by
local markets. 2021 to 687 Bcm last year, with around 1.6 Bcm. This was further
40.2% and 24.1% of the increases supported by the restart of the
Following the Russia-Ukraine stemming from Iran and Saudi Hammerfest LNG facility in early
crisis, production in Russia Arabia, respectively. The signifi- June 2022, with all its 40 cargoes
decreased by 87.2 Bcm or 12.3% cant increase stems from the re- shipped to Europe.
from 709.7 Bcm in 2021 to gion’s goal to boost self-sufficien-
622.5 Bcm in 2022. The reason cy and further export potential. By contrast, Africa saw gas
for the decreased output is production dip by 2.9 Bcm (about
two-fold. First, the division of In Asia, gas production rose 1.1%) between 2021 and 2022,
Russia's gas supply system into modestly from 695.9 Bcm in 2021 mainly due to declining produc-
two distinct segments, one in the to 712.2 Bcm in 2022. Most nota- tion from large, maturing fields in
west and one in the east, without bly, there was a significant surge Egypt. However, net production
interconnection, posed a compli- in Chinese production, amounting increases from Algeria and Libya
cation for redirecting gas exports. to a remarkable increase of 12.5 remained strong, increasing in
Consequently, lack of gas Bcm. The increase is in alignment total about 2.9 Bcm in 2022,
infrastructure in the east, other with the strategic objectives out- partially offsetting the declines
than solely the Power of Siberia lined in the country’s latest five- in mature field production. The
pipeline, forced Gazprom to cut year plan for 2020-2025, which potential for additional growth in
production in line with reduced seeks to bolster domestic gas pro- the supply development in Africa
gas exports to Europe. By duction to enhance energy securi- is high, as the continent holds 8%
contrast, the independent LNG ty. Apart from China, the region’s of the world’s gas reserves and
producer Novatek boosted gas upturn can be primarily attributed has ambitious plans for their
output in 2022, mainly thanks to to expansions in Turkmenistan development. Importantly, more
its LNG portfolio which is more and Azerbaijan, with the rest of gas will be needed to fuel
resilient to market turbulence. Asia experiencing either marginal domestic industrialisation and
Second, the explosions in the growth or a decline in production improve modern energy access to
North Stream infrastructure in during 2022. With the aforemen- its growing population. With 600
September 2022 significantly tioned additions, the year of 2022 million Africans lacking access to
diminished Russia's export marks the first time since 2013 electricity and with its young and
capabilities to Europe. A further that Asia's gas self-sufficiency fast-growing population, Africa is
examination of these develop- rate has grown. This reversal of a good candidate for development
ments can be found under the the trend signifies a notable shift of domestic gas markets. However,
Trade Flows section. from the past, where gas produc- capturing this potential will

require concerted effort from According to the IEA, Africa’s 2022, mainly attributable to
the key regional actors to energy sector still faces Argentina and Peru. This
address existing barriers such as challenges in rebounding region too has significant
securing capital and buildout of from the sharp decline in oil potential in the onshore
significant infrastructure, as well and gas spending levels in 2014. resources that could be
as streamlining policy and developed to meet growing
improving business climate South America saw a modest local demand and even facilitate
and project delivery timelines4. supply growth of 4 Bcm in for exports.
Trade flows
Figure 18: Gas demand, production, and import/export volumes, split by region
Bcm
1,800
Europe Asia Australia Africa Russia Middle East North America South America
1,600
IMPORTER IMPORTER EXPORTER EXPORTER EXPORTER EXPORTER EXPORTER Balanced
1,400
1,200
1,000
800
600
400
200
-200
2022
2010
2010
2010
2022
2010
2022
2010
2022
2010
2010
2022
2022
2022
2010
2022
-400
-600
Production Demand Implied import needs Implied export potential
Figure 18 illustrates the disparity Figure 19: Global net gas export volumes, split by flow type
in gas production and demand
across various regions. Some Bcm
regions exhibit a surplus of
1,200
gas production over their local 1,124
demand, categorising them as 1,042
exporting regions, while others 1,000
experience a deficit, classifying
them as importing regions. In the 46%
case of exporting regions, the 800 51%
LNG
volume they can export without
tapping into their stored gas 600
reserves is termed the "implied
export capacity". Conversely, for
importing regions, the quantity 400
they can import without 54%
Pipeline 49%
resorting to their stored gas 200
reserves is denoted as the
"implied import requirements".
0
2021 2022

4
IGU “Gas for Africa 2023”

As previously highlighted, the namely Russia and North America, 1 pipeline, and the surge of
year 2022 brought substantial as illustrated in Figure 18. 2022 LNG flowing into Europe. This
fluctuations in both the supply witnessed a substantial shift in sub-chapter examines how the
and demand of gas. These fluctu- the share of exports from pipeline changes in Russian pipeline flows
ations in turn had notable conse- to LNG, primarily attributed to triggered cascading impacts on LNG
quences on global trade flows, the reduction in Russian pipeline trade patterns, influenced develop-
especially for the two largest gas exports following the commence- ments in European gas storage and
importing regions, Europe and ment of the Russia-Ukraine war, infrastructure, and shaped trends
Asia, and large exporting regions, the explosion of the Nord Stream in the SPA contract scene.
Developments in Russian pipeline trade flows
Figure 20: Russian gas flows 2021 Figure 21: Russian gas flows 2022
Bcm Bcm
800 800
710 475
700 700
623 452
600 600
500 500

400 400

300 235 300

Storage (2)
LNG (41) 191 171
200 Middle East (28) 200
Storage (18) 107
100
Pipeline Europe LNG (45) Asia (6)
100
(191) (168) Middle East (18)
Pipeline
Europe
0 Asia (-4) (107) (83)
0
Domestic Domestic Total exports Total pipeline Domestic Domestic Total exports Total pipeline
production demand exports production demand exports
- 100
In 2022, Russian production plum- Nord Stream 1 pipeline. Exports Poland, it could reduce Russian
meted by around 87.2 Bcm amidst through this pipeline were gas pipeline flows to Europe even
the war in Ukraine due to curtail- reduced by Russia from June further.
ments by Gazprom. In turn, net 2022, before halting completely
pipeline exports were reduced by following an explosion of the To counter the curtailed imports,
about 44%, from 191 Bcm to 107 Nord Stream 1 and 2 pipelines on European producers attempted
Bcm, with Europe being the most 26 September 2022. Prior to this, to maximise output within the
affected importing region. Nord Stream 1 was responsible limitations of existing infrastruc-
for almost 50% of Russian exports ture. Among the notable Europe-
Europe saw the number of oper- into Europe. Russian pipeline gas an production boosts, Norway,
ating pipeline gas supply routes exports to Europe via Ukraine, and the United Kingdom achieved
from Russia reduce from six to totalling about 27 Bcm yearly, production increases of 9.2 Bcm
two during 2022, which remains continued through 2022 and per- and 5.5 Bcm, reflecting year-on-
the case in September 2023. sist in terms of daily volumes as year growth rates of 7.5% and
Consequently, more than 84 Bcm of September 2023, although the 17.1%, respectively. As alternative
of Russian pipeline gas stopped agreement for transits through gas pipelines to Europe were
flowing to Europe, equivalent to Russia’s exit point at Sudzha is due already operating close to full
about 34% of European imported to expire on 30 December 2024. capacity or was constrained by up-
gas volumes and 17% of total gas If the agreement is not renewed stream supply availability, Europe
consumption in the region. The by Russia and Ukraine, or the flow turned to LNG imports for the
largest impact came from the being redirected through rescue, a subject covered in more
reduction in exports through the alternative routes via Turkey or detail later in this sub-chapter.

Figure 22: Russian pipeline gas flows to Europe by entry point
Million cubic meters per day ( MMcmd )
400
350
300
250
200
150
100
50
0
Sep-21 Nov-21 Jan-22 Mar-22 May-22 Jul-22 Sep-22 Nov-22 Jan-23 Mar-23 May-23 Jul-23 Sep-23
NEL (Nord Stream) OPAL (Nord Stream) Imatra (Russia- Finland) Mallnow (Yamal- Europe)
Sokhranovka (Ukraine) Strandzha 2 (Turk Stream) Sudzha (Ukraine)
In Asia, Russia’s net pipeline ex- contribution to this development boost exports to China by 50 Bcm
ports turned positive, as imports, was Power of Siberia 1 increasing annually through Power of Siberia
primarily from Turkmenistan, pipeline exports to China by over 2, while the existing Power of
decreased while exports, primar- 50%. Further, it was communicated Siberia 1 pipeline is set to deliver
ily to China, increased. The main that Russia plans to further 38 Bcm per year by 2025.
Figure 23: Russian pipeline gas imports/exports Figure 24: Russian pipeline gas imports/exports
with Asia 2021 with Asia 2022
Bcm Bcm
35 35
30 30
25 25
20 20 18.8
17.1
15 12.9 15 12.5
10 10
6.3
5 5
-4.3
0 0
-5 Export Import Net export

-5
Export Import Net export
China Armenia Azerbaijan Kyrgyzstan China Armenia Azerbaijan Kyrgyzstan

Kazakhstan Turkmenistan Uzbekistan Kazakhstan Turkmenistan Uzbekistan
Limited supply of LNG brought fierce competition

To replace all the curtailed Russian potential shift would be. Europe world’s total gas production was
gas supply to Europe with LNG attempting to cover as much of exported in the form of LNG, at
would require more than 21% the demand as possible brought a an estimated 401.5 million
of the total traded LNG globally, cascade of far-reaching effects. tonnes. This represents an
underscoring how profound the In 2022, roughly 13% of the approximate 6.8% rise in LNG

exports from the 375.9 million consumption of LNG in Europe. of traded LNG, predominantly
tonnes recorded in 2021. On This shift was driven by a greater sourced from the United
a regional level, the most willingness to pay a premium States, and also from Asia to
notable shift was the increased price, resulting in a redirection Europe.
Figure 25: Global LNG trade flows 2021 Figure 26: Global LNG trade flows 2022
Million tonnes Million tonnes
Australia : 81.1 China : 78.9 Australia : 81.7 Japan : 73.8
China : 62.0
Qatar: 80.0 Japan : 77.8 Qatar: 80.9
South Korea : 46.5

South Korea : 47.4
United States : 71.7 United States : 78.6
France: 27.1
India: 23.1
Russia : 30.7 Russia : 33.6 Spain : 22.3

Chinese Taipei : 20.4
Malaysia: 23.4 Spain : 15.4 Malaysia: 24.3 Chinese Taipei : 20.6
Nigeria : 17.0 France: 13.3 Nigeria : 15.1 India: 19.9
Algeria: 11.8 United Kingdom : 11.5 Indonesia : 11.5 United Kingdom : 19.8
Indonesia : 10.9 Turkey: 9.9 Oman : 11.3
Netherlands : 12.4
Oman : 10.1 Algeria: 10.4
Others: 81.7 Others: 90.7
Others:: 42.7 Others:: 47.7
Made with SankeyMATIC Made with SankeyMATIC
Europe saw the largest increase Monthly traded volumes of LNG of Russian LNG. The collective
in imported LNG, rising from 74 are shown in Figure 27, with effort managed to bridge 97%
million tonnes in 2021 to 124 the uptick of the United States of the gap in pipeline gas supply
million tonnes in 2022, an increase exports clearly visible at the caused by the Russian pipeline gas
of almost 68%. Out of exporters beginning of 2022 and remaining reductions. Even though the EU27
to fill the European demand, the high ever since. Qatar, Russia, and successfully mitigated the majori-
United States increased exports Nigeria are the next three domi- ty of the losses, gas consumption
to Europe by more than 30 mil- nant exporters of LNG to Europe, still decreased by around 41 Bcm
lion tonnes from 2021 to 2022, with the region’s largest being and at the expense of rising coal
a 159% year-on-year increase. France, Spain, Belgium, and the consumption. It is worth noting
Within Europe, France was the Netherlands. Significantly, despite that the EU27 accumulated a sub-
dominant LNG importer, more the pipeline gas curtailments, stantial storage buildup of 33 Bcm
than doubling LNG imports from Russian LNG exports to Europe during that year.
13 million tonnes to 27 million have maintained a consistent
tonnes year-on-year, of which over growth trajectory, increasing by As a result of Europe’s surging
64% came from the United States. more than 260% in 2022 com- demand for LNG in 2022, many
Other large European import- pared to 2018. leading importing nations in the
ers Spain, the United Kingdom, region operated regasification fa-
the Netherlands, and Italy also In Europe, the EU27 saw the cilities close to, or even exceeding,
increased LNG imports by 43%, largest reduction of Russian nameplate capacity for prolonged
75%, 98% and 44% respectively in pipeline gas imports, amounting durations, as illustrated in Figure
2022, with most of the increases to 80 Bcm between 2021 and 29. For example, regasification
coming from the United States. 2022. To offset this shortfall, facilities in the Netherlands saw
Although gas demand in Germany there was a notable surge in gas a consistent utilisation rate over
was high during 2022, the coun- imports predominantly from the 100% in the first half of 2022, a
try imported insignificant LNG United States in the form of LNG, trend which only reversed once a
volumes for much of the year due and from Norway and the United new import facility started
to a lack of regasification facilities Kingdom in the form of piped operating later that year.
until its first FSRU came online gas. This was further comple- Consequently, European newly
towards the end of 2022. mented by an increase in imports installed regasification capacity

Figure 27: European LNG imports by origin
Million tonnes (Mt)
12
10
0
21
22
2
2
22
23
23
3
1
21
21
22
22
22
22
23
-2
-2
-2
-2
l -2
-2
-2
2
-2
-2
-2
l -2
-2
-2
-2
-2
n-
g-
n-
r-
n-
g-
p-
n-
b-
r-
p-
n-
b-
r-
ov
ec
ov
ec
ct
ct
ar
ar
b
ar
ay
ay
ay
Ju
Ju
Ap
Ap
Ap
Ju
Ja
Ju
Ja
Ja
Au
Au
Se
Se
Fe
Fe
Fe
O
M
M
M
D
M
M
M
Algeria Angola Egypt Equatorial Guinea Finland France Nigeria Oman Peru Puerto Rico Qatar Russia Trinidad & Tobago US Other
grew by more than 14 million declining gas pipeline flows from China were redirected to Japan,
tonnes per annum (MTPA) in 2022 Russia. with South Korea, Chinese
and about 11 MTPA so far in 2023 Taipei, and Thailand accounting
(as of September), a significant In Asia, the most significant shift for approximately 51%. Converse-
increase compared to earlier years. in 2022 was China reducing LNG ly, a significant portion of Qatar’s
Nearly 80% and 100% respective- imports from Australia and the exports that were previously
ly of new European LNG import United States by 10.9 million destined for Japan were redirect-
capacity has involved FSRUs, as tonnes and 10.1 million tonnes ed to China in 2022 via long-term
these have shorter lead times than respectively, while boosting imports contracts signed with Chinese gas
traditional onshore terminals and from Qatar by approximately 7.4 importers. Further, during the first
enabled Europe to rapidly scale up million tonnes. About 36% of the half of 2023, lower spot prices,
import capacity to offset the reduced Australian exports to higher contracted volumes, and
Figure 28: Estimated changes in EU27 gas availability from 2021 to 2022, split by source

Figure 29: Regasification utilisation in selected European countries
Utilization vs. Nameplate capacity
140%
2022
120%
100%
80%
60%
40%
20%
0%
2
2
22
23
0
20
21
1
9
19
02
02
02
02
02
02
02
02
02
02
02
02
02
02
02
01
01
01
01
01
02
02
02
20
20
20
20
20
-2
-2
-2
-2
-2
-2
-2
-2
-2
-2
-2
-2
-2
-2
-2
-2
-2
-2
-2
-2
-2
-2
-2
l-
l-
l-
l-
l-
p
p
p
ay
ay
ay
ay
ay
n
n
n
n
n
ov
ov
ov
ov
ar
ar
ar
ar
ar
Ju
Ju
Ju
Ju
Ju
Se
Se
Se
Se
Ja
Ja
Ja
Ja
Ja
M
M
M
M
M
M
N
N
N
N
France Italy Netherlands Spain United Kingdom Capacity
record-breaking warm tempera-

tures led to a rise in LNG imports Figure 30: Russian LNG production capacity
to China. In recent decades,
Japanese entities have been
acquiring equity stakes in foreign
upstream gas projects and LNG
developments to ensure supply
into Japan. Mitsui, Mitsubishi
and Inpex are the largest acquir-
ers, with town gas companies in
Tokyo and Osaka also securing a
presence further down the value
chain. Japanese entities have
been investing significantly in
Australia, the United States,
Indonesia, Canada, and other
areas with gas resources. Similar
investments are being undertaken
by Chinese operators Sinopec,
CNOOC, and PetroChina which
have been investing in
Turkmenistan, Kazakhstan,
Australia, Egypt, and other
gas-rich countries.
Source: Rystad Energy; IGU LNG Report
During the first half of 2023,
monthly global LNG exports month decrease primarily from tonnes, a difference translating
consistently surpassed the 2022 producers in Qatar, Norway, and to about 37 cargoes. Nonethe-
levels, resulting in a cumulative Australia, which were unable to less, LNG exports rebounded in
year-on-year increase of 4.1% be remedied by modest increase July and kept above 33.2 million
and totalling 205 million tonnes. from Indonesia Malaysia, and tonnes level in August. In Septem-
During the northern hemisphere Mozambique. This led global LNG ber 2023, there have been disrup-
summer, LNG supply experienced exports to fall from 34.9 million tion in gas supply due to rolling
some volatility due to facility tonnes in April 2023 to 32.3 strikes, work bans and stoppages
maintenance and outages. May million tonnes in May 2023, below at the Gorgon LNG and
2023 saw the biggest month-on- the 2022 average of 33.9 million Wheatstone facilities in Western

Australia, potentially impacting

about 5% of global LNG pro- Figure 31: Global liquefaction capex, split by region
duction. Gorgon LNG has three
liquefaction trains with a com- Billion USD
bined capacity of 15.6 MTPA of
LNG, while Wheatstone’s two LNG 40
trains have a combined capacity of
8.9 MTPA. This poses threats if the 35 34
33
strikes and outages last until peak
winter season. 30
27
25 23 23 24
Russian LNG export volumes have 22
21
been, and are still in September
20 18 18
2023, exported to both Asian and 17
16
European buyers. Since 2017, 15
Russia has more than tripled its 10
LNG export capacity through the 10
development of the Yamal LNG
facilities. Further, The Portovaya 5
LNG export terminal was
completed in 2022 and is 0
expected to contribute towards 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
even higher LNG export capacity Australia North America Africa
Russia Asia Middle East
in 2023 which will be its first full Europe South America Total
year of production. The three
trains at Arctic LNG currently in Source: Rystad Energy; IGU LNG Report
development will bolster export
capacity through the northeastern
passage and to Europe. Notewor- the growth additions remain September have already exceeded
thily, the second train, Arctic LNG significantly below the high points the totals for each of the
T2, has faced delays and is of 2013-14. New liquefaction individual full years of 2020, 2021,
currently expected to start investments in 2022 were mainly and 2022. Despite growth and
operation in 2024. The Baltic LNG led by the United States, Canada, positive sentiments amidst current
project is being developed by Mozambique, Australia, Qatar, market events, significant uncer-
Gazprom in proximity to European and Mexico. From the beginning tainty arouond the LNG market’s
buyers, expected to add 13 million of 2022 to September 2023, future trajectory and the role of gas
tonnes of LNG capacity. Although about 81.2 MTPA of new capac- in the energy transition continues
previously expected to finish in ity reached FID or construction, to weigh heavily on, and in some
2023, the project is now facing an with the United States and Qatar cases delay, investment decisions.
expected two-year delay. representing about 70.6% and This in turn poses significant chal-
19.2% of the additions respectively. lenges for several critical aspects,
Globally, liquefaction investments In 2023, there has been a including supply security, industry
recovered in 2022, growing by remarkable surge in newly installed development predictability, unmet
23% compared to 2021. Yet, capacity, as the installations by demand, and pricing, among others.
European gas storage goals were surpassed

Despite tight gas balances by the same date in subsequent Considering the recent advance-
throughout the winter of years. On an aggregate level, ments in gas storage levels,
2021/22, European storage levels 2022’s goal was reached by Europe is expected to encounter a
rebounded in mid-2022 after the end-August 2022, exceeding the winter season that is more robust
EU revised gas storage regulations targets, although some countries and resilient than the previous
to increase stocks in response to still struggled to adhere to their year. Yet, it is important to
the Russia-Ukraine crisis. Through obligations. For 2023 August, acknowledge that there are
the REPowerEU initiative, the EU storage levels in Europe have several potential factors, such as
mandated that storage facilities consistently stayed close to, or at, temperatures and further supply
should be at least 80% full by record levels, exceeding the events, that could significantly
November 2022 and 90% full storage objectives set by the EU. upset the balance.

Figure 32: Daily European gas storage volumes and range in underground storage, excluding Ukraine
Bcm
140
120
100
80
60
40
20
0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Min/Max 5-year 2021 2022 2023
Global LNG contracts mainly focused on longevity

Historically, Asia has been the
largest purchaser of LNG volumes, Figure 33: LNG contracted volumes, split by region and portfolio
followed by Europe, with the
Asian region actively contracting Million tonnes
even larger and longer-term
80
volumes over the last decade
(see Figure 34 for contract du- 70 67.4 67.2
rations). However, following the 2%
natural gas supply crunch in 60
2021, newly signed contracts for 51.2
32%
LNG volumes spiked during 50
11% 55%
2021 and 2022, mainly aimed at 3%
17%
bolstering energy security in the 40
34.4
face of growing uncertainty. This 13% 31.6
29.1
trend was primarily caused by 30 23%
1% 26.6 16%
25.0
21% 14%
strategic decisions taken around 21% 31% 64%
20
energy supply in Asia and Europe. 48% 12% 25%
61%
59%
While Asia continued to secure 24% 30%
10 3% 31%
contracted volumes, Europe 53% 3%
25% 43% 38%
mainly focused on obtaining 19%
0
spot volumes through portfolio 2015 2016 2017 2018 2019 2020 2021 2022
contracts. It is noteworthy that
Asia Europe Portfolio Others
volumes stemming from portfolio
contracts will eventually end up in Source: Rystad Energy; IGU LNG Report
the spot market, available not
only to Europe but also Asia and for more reliable LNG supply higher percentage of new
other regions opting to import than Europe. While the total contracts being long-term in
LNG. The strategic divergence contracted volume of LNG has nature. As much as 67% of all
between Asia and Europe ulti- surged in recent years, a large new volume signed in 2022 was
mately results in different levels share of this comes from an uptick for over 20 years in length, an
of predictability and reliability in the proportion of long-term increase of 24 percentage points
for their respective LNG supplies, agreements. This shift in focus from 2021 which was already at
with Asia’s strategy positioning it continued in 2022, with an even record-high levels.

Table 2: LNG contract types
LNG transaction t ypes Description
• Purchase or sales of LNG are made at prices in real time

Spot
• Most spot market transactions are settled in a few days
• By players who hold LNG supplies from different regions , and have
shipping, storage , and regasification assets
Portfolio contracts
• Contracts can be either short -term or long -term
• Prices can be on a spot or term contract basis
• Price is often linked to natural gas and oil benchmark prices

Long-term contracts
• Contract period is typically more than 15 years
Figure 34: New LNG contracted volumes, split by Figure 35: New LNG contracted volume durations
duration (2022), split by duration
Million tonnes
Million tonnes
80 50
70 67.4 67.2 45
40 37.2
60
51.2 35
43%
50 4%
30
67%
40 39% 25
34.4 20.9 71%
5% 31.6
29.1 20
30 26.6 27%
25.0 19%
4% 28%
53%
26%
19% 15 60%
20 34%
55% 9.1
10
51% 28%
73% 25%
10 24% 28%
28% 66% 27%
31% 17% 5
6%
19% 24% 19% 34%
15% 7% 5% 5% 11% 2%
0 0
2015 2016 2017 2018 2019 2020 2021 2022 Asia Europe Portfolio
Less than 5 Between 5 and 10 Between 11 and 20 More than 20 Less than 5 Between 5 and 10 Between 11 and 20 More than 20
Source: Rystad Energy; IGU LNG Report Source: Rystad Energy; IGU LNG Report
Pricing
In general, 2022 stands out as a responses. Thereafter, gas prices In response, the European Council
year of unparalleled turbulence embarked on a streak of re- reached a consensus in December
for global gas markets, coming on cord-breaking surges. The peak 2022, setting a price limit at
the back of already elevated 2021 of this chaotic period came in 180 EUR per megawatt-hour
prices amidst a tight global late-August 2022, when natural (equalling about 55 USD/MMBtu).
market. The year began with an gas prices reached an all-time Across Asia in 2022, a combination
air of uncertainty over Russian high as the Netherlands-based of factors including fluctuating
pipeline supplies to Europe. From Title Transfer Facility (TTF) closed demand due to Covid-19-related
there, gas prices experienced at around 90 USD/MMBtu and lockdowns in China, price-induced
their first record spike after the Asian prices surged past 60 USD/ demand contraction in the
Russia war with Ukraine began MMBtu. Amidst the hike in prices, South and South-East, and fuel-
in late-February 2022, and several European Union member switching led to Asian gas
triggered a cascade of states called for a price cap on prices consistently trading below
geopolitical and energy sector natural gas prices within the EU. TTF.

Figure 36: International natural gas prices

USD (real) per MMBtu
120 Reports of sabotage on the Nord

Stream pipelines and threats to energy
infrastructure as Europe roiled under
100
concurrent heatwaves
Onset of Russia-Ukraine war

80 heightens concerns over
Russian pipeline supply
60 2022
40
20
0
19
19
20
20
21
21
22
22
M 3
23
9
3
l -1
l -2
l -2
l -2
l -2
-1
-1
-1
-2
-2
-2
-2
-2
-2
-2
-2
-2
-2
-2
p-
p-
p-
p-
p-
n-
n-
n-
n-
n-
ay
ay
ay
ay
ay
ov
ov
ov
ov
ar
ar
ar
ar
ar
Ju
Ju
Ju
Ju
Ju
Se
Se
Se
Se
Se
Ja
Ja
Ja
Ja
Ja
M
M
N
N
Figure 37: International natural gas price volatility

Inter -monthly standard deviation (USD (real) per MMBtu)
Reports of sabotage on the Nord Stream
15 pipelines and threats to energy infrastructure as
14 Europe roiled under concurrent heatwaves
13
12 Onset of Russia-Ukraine war
11 heightens concerns over Fear of strikes in Australia
10 Russian pipeline supply followed by the strike
starting caused price hikes
9
in August and September
8
7
6
5
4
3 Average TTF volatility levels in 2023 are almost
2 5x higher than those of 2019 and 2020
1
0
19
19
20
20
21
21
22
22
23
23
9
3
l- 1
l- 2
l- 2
l- 2
l- 2
-1
-1
-1
-2
-2
-2
-2
-2
-2
-2
-2
-2
-2
-2
p-
p-
p-
p-
p-
n-
n-
n-
n-
n-
ay
ay
ay
ay
ay
ov
ov
ov
ov
ar
ar
ar
ar
ar
Ju
Ju
Ju
Ju
Ju
Se
Se
Se
Se
Se
Ja
Ja
Ja
Ja
Ja
M
M
N
So far in 2023 (September), gas prices. At the same time, price pected, mainly due to the exceed-
natural gas prices have predomi- reductions in early 2023 triggered ingly tight market balances with
nantly been on a downward trend, some spot buying activity from no major new supply additions to
where factors such as demand price-sensitive markets in Asia. come for the next two years. This
contraction and a relatively warm So far in 2023, the prices remain vulnerability was clearly demon-
beginning to the northern autumn much lower and less volatile in strated by the market's price
have led to price reductions. On than in 2022. Despite the im- response to the labour strikes at
the supply side, Freeport LNG provements seen from 2022, gas Chevron's facilities in Australia in
in the United States returned prices and price volatility in 2023 September 2023, which have now
to production in February 2023 remains significantly higher than been resolved. Going forward, any
after being out of service due to in pre-crisis years (as depicted in notable shift on either demand or
a fire in June 2022, restoring a figures 36 and 37). As of Septem- the supply side, like a harsh winter
significant share of liquefaction ber 2023, the gas prices show or a supply shortage bound for
capacity and putting downward extreme sensitivity to any change Europe or Asia, could disrupt the
pressure on European and Asian in market conditions, real or ex- fragile equilibrium once again.

Turbulent LNG markets caused local gas prices to spike

For importing regions, the gas
Figure
Figure3 -38:
Wholesale Price Levels
Wholesale price 2005 to 2022
levels 2005BytoRegion
2022 by region
prices in local markets are
determined by the supply of gas
35.0
at the market entry point, where
these entry point prices in turn are 30.0
dependent on localised factors,
including infrastructure capacity. 25.0
These regions are typically priced
$/MMBTU
20.0
against global LNG prices, as they
compete for the same scarce LNG 15.0
volumes. Throughout 2022 and 10.0
extending into 2023, the massive
demand for LNG imports to 5.0
Europe led to a bidding war 0.0
between Europe and Asia for 2005 2007 2009 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
these scarce LNG volumes, leading
North America Europe Asia
to local gas prices soaring in
both regions. This was in turn Asia Paciﬁc Latin America FSU
reflected in Asian spot and TTF Africa Middle East World
pricing developments . Source: IGU
As Europe's dependence on this dependence works both development of these dynamics,

traded-market LNG has surged, ways in an environment of tight where disruptions that would
while its previous cushion of global supply where greater previously have had limited
long-term contracted Russian demand competes for limited impact on European markets
pipeline gas has largely resources. The impact of the now caused the price to soar by
disappeared, there is a greater September 2023 strikes in about 18% and 13% following
interdependence between Australian on European gas the strike warning and the
Europe’s market and the other future prices serves as a commencement of the strike,
regions. As 2022 demonstrated, compelling illustration of the respectively.
Henry Hub’s correlation with other LNG markets

has, and could continue to, strengthen
Markets that rely primarily on increase compared to previous variation of prices5 on a global
domestic production to meet periods, as it followed the price scale. In 2022, it soared to nearly
local demand have historically increases more closely. While 100%, marking a substantial
developed almost independently LNG exports contributed to these increase from around 60% in the
of other markets, with prices set developments, increased local previous year. In the foreseeable
by local forces, as can be seen gas demand in the United States, future, Europe expanding its re-
in most of the Middle East and coupled with constraints in the gasification capacity and engaging
the United States. In 2022, and pipeline infrastructure to meet in more spot volume trading,
continuing into 2023, this dynamic this demand, also played a coupled with the United States
was mirrored in the developments significant role. Thus, the increased expanding their pipeline network,
of the Henry Hub which averaged correlation was not necessarily a especially from the Permian basin,
a price about five and six times causal effect of exports alone. and increasing liquefaction capac-
lower than Asian spot and TTF ity, could set the scene for further
respectively. Yet, in both 2022 Through a thorough examination, price convergence. However,
and up to September 2023, Henry the IGU's Wholesale Gas Price prevailing uncertainties persist
Hub’s correlation with other Survey for 2023 revealed a notable regarding various factors, includ-
LNG markets exhibited a notable surge in the coefficient of ing European gas demand and
5
The coefficient of variation of prices of a dataset in a certain year is determined by the standard deviation divided by the
mean value of these prices. The amount of absolute price variation (standard deviation) is thus measured relative to the
average price in a certain year. A low coefficient of variation indicates a higher level of price convergence and vice-versa.

American associated shale forward should entail TTF prices and premiums, and as such being
gas exports. Nevertheless, trading at the HH price with more closely correlated with the
efficient LNG markets going additional shipping, liquefaction, HH price.
High gas prices drove gas-to-coal switching
Figure 39: Daily European gas prices (TTF) vs Figure 40: Monthly average LNG prices vs
coal-switching price in the Netherlands coal-switching price in Japan
USD per million British thermal units (MMBtu) USD per million British thermal units (MMBtu)
120 60
2022 2022
100 50
80 40
60 30
40 20
20 10
- -
3
Se 1
N - 21
Ja - 21
M - 22
M r- 22
Se - 22
N - 22
Ja - 22
M - 23
M - 23
Ja - 20
M - 21
M r- 21
M - 20
M r- 20
Se - 20
N - 20
N - 21
N - 22
N - 20
Ju 23
Ju 22
Ju 21
Ju 20
3
Se 2
Ja - 22
M - 23
M - 23
M - 21
M r- 21
Se - 21
Ja - 21
M - 22
M r- 22
M - 20
M - 20
Se - 20
Ja - 20
Ju 23
Ju 21
Ju 22
Ju 20
l -2
l-2
l- 2
l- 2
p
p
p
-
-
-
-
n
n
n
n
ov
ov
ov
-
-
-
-
ar
ay
ay
ay
ay
p
p
l
l
l
l
n
n
n
n
ov
ov
ov
ar
ar
ay
ay
ay
a
a
ay
a
Ja
a
Ja
Coal 34% vs Gas56% Coal 36% vs Gas54% Coal 38% vs Gas52% Coal 34% vs Gas56% Coal 36% vs Gas54% Coal 38% vs Gas52%
Coal 40% vs Gas50% Coal 42% vs Gas48% TTF Day Ahead Coal 40% vs Gas50% Coal 42% vs Gas48% Asia LNG spot price
Figure 41: Monthly average Henry Hub gas price

In figures 39 to 41, Coal 42% vs Gas 48% vs coal-switching price in the United States
(grey shaded area) signifies the lower
range of the coal-to-gas switching band USD per million British thermal units (MMBtu)
between high-efficiency coal (42%) and 16

low-efficiency gas (48%), while Coal 34% 14 2022
vs Gas 56% (in dark blue) shows the higher
12
range of the coal-to-gas switching band
between low-efficiency coal (34%) and 10
high-efficiency gas (56%). When the yellow 8

line crosses the grey area it is cheaper to 6
turn on the most efficient coal-fired power
4
plants at the expense of the least efficient
gas-fired, similarly, if the line is above all of 2
the bands even the most efficient gas-fired -
power plants are more expensive than the
3
M - 22
Se - 22
N - 22
Ja - 22
M - 23
M - 23
M - 21
M - 21
Se - 21
N - 21
Ja - 21
M - 22
M - 20
M r - 20
Se - 20
N - 20
Ja - 20
Ju 23
Ju 22
Ju 21
Ju 20
l-2
p
p
p
least efficient coal-fired ones.

-
-
-
-
n
n
n
n
ov
ov
ov
ar
ar
ar
ay
ay
ay
ay
l
l
l
a
Ja
Coal 34% vs Gas56% Coal 36% vs Gas54%

Coal 38% vs Gas52% Coal 40% vs Gas50%
Coal 42% vs Gas48% Henry Hub Fronth Month
If gas prices reach high levels, the existing infrastructure that evaluated using coal switching
potential for switching to has lain dormant due to price bands. Broadly speaking,
alternative fuels comes into play. environmental concerns and the when the gas price exceeds the
Typical fuels used in such cases growing integration of carbon band, it becomes economically
include coal and fuel oil, for which pricing. The choice to switch viable to switch to coal. As
numerous countries have pre- from gas to coal is commonly illustrated in figures 39 to 41, in

Figure 42: European Emission Allowance (EUA) price – EU Emission Trading System (EU ETS)
USD per tonne of CO2
120
110
100
90
80
70
EUA price jumped around
60
300% in one year
50
40 EUA
30
20
10
Phase 3 (2013-2020) Phase 4 (2021-2030)
0
0 0 0 0 20 20 20 20 21 21 21 21 21 1 1 1 21 21 21 21 22 22 22 22 22 2 2 2 22 22 22 22 23 23 23 23 23 3 3 3
-2 -2 l -2 -2 - - - - - - r- - - -2 l -2 -2 - - - - - - r- - - -2 l -2 -2 - - - - - - r- - - -2 l -2 -2
ay Jun Ju Aug Sep Oct Nov Dec Jan Feb Ma Apr ay Jun Ju Aug Sep Oct Nov Dec Jan Feb Ma Apr ay Jun Ju Aug Sep Oct Nov Dec Jan Feb Ma Apr ay Jun Ju Aug
M M M M
2021 the gas price surpassed this coal switching in Asia and Europa continue to rise from the
band at all trading points. This trend has weakened as gas prices have previous year, favouring coal-
intensified in 2022 for both Asian decreased, prompting numerous to-gas switching. Subsequently,
spot and TTF, driven by the soaring power generation companies to many regions switched from
gas prices. In 2022 switching was revert to using natural gas. using gas to using coal, driven
economically attractive and as both by economic factors and
such, Europe and Asia saw a coal- European carbon prices are constraints such as limited import
fired power generation increase incorporated in the European capabilities. A direct consequence
of 1.3% and 2.6% respectively in coal-switching price bands, as of the increased adoption of gas-
2022 compared with 2021. Coal coal is a higher emitter than gas. to-coal switching was a rebound
prices rose with increased demand Consequently, a high carbon price in carbon prices, as energy and
with higher gas to coal switching makes gas and other low emitters coal-related supply chains were
activity. Leading up to September preferable to coal. The beginning required to buy more carbon
2023, the economic justification for of 2022 saw carbon prices allowances.
Emissions Figure 43: Global energy emissions, split by

energy source
Despite significant reductions in energy use in Megatonnes CO2 eq.
many regions in response to the global energy
50,000
crisis, global emissions from energy still reached
a record-breaking level in 2022 of almost 42 45,000 41,982 42,029
41,815 41,562
40,845
40,004 39,925
gigatonnes. 2022 saw the introduction of new 40,000
8%
8%
8% 8% 9% 9%
9%
energy transition acceleration policies, including 35,000 17% 17% 17%
17% 18%
the Inflation Reduction Act (IRA) in the United 16% 18%
30,000
States and REPowerEU in Europe.
25,000
36% 36% 35% 35% 34% 34%
34%
In 2022, total global energy-related CO2 20,000
emissions grew by about 1.1%, continuing the 15,000
upward trajectory. Emissions from natural gas
10,000
consumption saw a minor decline, partly 40% 39% 39% 39% 39% 40% 40%
attributed to price spikes which incentivised the 5,000

adoption of alternative energy sources. As a 0
result of gas-to-coal switching, total emissions 2016 2017 2018 2019 2020 2021 2022
from coal increased in 2022 albeit decreasing in Coal Liquids Gas Others
portion of total emission mix, reaching an Source: Rystad Energy

all-time high of about 16,752

mega-tonnes of CO2 equivalents. Figure 44: Asia’s power mix (2016-2022), split by energy source
The rise in total coal usage
despite worldwide initiatives to
diminish its dependency on coal, TWh
as it is the main driver of global
emissions contributing to 16,000 14 531
14 061
climate change highlights that 14,000 12 572 13 002
13 240
1% 2%
1% 2%
1% 5%
the fuel remains a hard to replace 11 271
11 918
1% 2%
1% 2% 2% 5%
5% 5% 13%
energy source. Coal has been 12,000 1% 2% 5% 12%
2% 2% 4% 9% 11%
8%
responsible for roughly 40% of 10,000
4%
6%
7%
14% 14%
15% 15% 15%
the annual energy-related 15%
15%
11%
11%
emissions consistently over the 8,000 12%
12% 12% 12%
13%
last years, as seen in Figure 43. 6,000
4,000 54%
Asian power 58% 56% 55% 55%
58% 58%
2,000
production continues
0
strong dependence 2016 2017 2018 2019 2020 2021 2022
on coal Coal Gas Hydro

Renewables Nuclear Bioenergy
Asia has experienced a
substantial surge in power Source: Rystad Energy
demand coupled with its
robust economic growth over
the past decade, and this Figure 45: Europe’s power mix (2016-2022), split by energy source
was primarily met by coal as an
energy source. From 2021 to
2022, there was a marginal 0.9% TWh
reduction in the use of gas for
5,000
power generation, while coal
saw a notable 2.6% increase.
3 936 3 935 3 970 3 898 3 920
These developments were 4,000 3 765 3 818
5% 5% 5% 5%
mainly driven by China, 5%
5% 5%
15% 14% 15% 14% 15%
accounting for a about 68.7% of 3,000
16%
14%
the increase in coal consumption 16% 17% 18% 20% 23%

26%
and about 37.5% of the reduction 23%
2,000 17% 18%

in gas. Looking ahead to 2023, 17%
20%
18%
19% 19%
both China and India are
21% 20% 18%
sustaining the upward trajectory 1,000
15%
12% 13%
14%
of coal utilisation for power
24% 24% 23% 24% 22% 22%
generation. In July 2023, these 19%
0
countries exhibited year-on-year
2016 2017 2018 2019 2020 2021 2022
growth rates in coal-based
Nuclear Coal Gas
power production, with China
Renewables Hydro Bioenergy
experiencing a 7.9% increase and
India recording an even more
substantial 9.3% growth. Source: Rystad Energy
Coal’s position in the European power mix continues reversed trend

Until 2021, coal-fired electricity However, in 2021 coal gained energy. In 2022, the shortage
generation had been steadily positive momentum again due to of gas supply in Europe created
declining in Europe since 2012, in growing affordability concerns more positive momentum for coal
large part thanks to switching to surrounding gas, coupled with over gas. Additionally, according
natural gas and renewables. availability concerns of renewable to the IEA, EU-countries faced a

Figure 46: Changes to power consumption in EU countries (2021-2022), by generating source
TWh
2021 total demand 2022 total demand

= 2,888 TWh = 2,809 TWh
0
Decreases in nuclear and hydro generation offset by increases in
-20 power generation from gas , coal, solar, wind, and other sources YOY
-40 total
changes
YOY
-60 declining
33 1
-80
The uptick in coal and -79
-100 gas would have been a
lot higher without 39
-120 wind and solar growth
- 119 YOY
-140 growing
28
-160
-180 5
- 66
-200
Nuclear Hydro Gas Coal Solar Wind Other *6 2022 Demand
Source: Ember monthly electricity data
loss of 119 TWh of nuclear 2022 despite decreases in overall from 2021, to 26 million tonnes
generation due to nuclear outages power consumption throughout CO2 equivalents. Yet, the reversal
in France and 66 TWh of hydro the year. Germany, due to limited of the long-term trend on cutting
generation stemming from the abilities to reroute gas imports (as down on coal usage is expected
extreme drought across Europe, discussed in the Trade Flows to be temporary as EU countries
which was fulfilled mainly by coal, sub-chapter), was in the forefront returning to implementing their
solar and wind. Consequently, of this development. Power sector pledges to phase out coal in the
European coal consumption in emissions in the EU countries future – Netherlands in 2029, and
power production increased in increased in 2022 by about 3.9% Germany and Romania in 2030.
The direct effect of gas-to-coal switching on power-related emissions

Table 3 illustrates the different carbon intensities
of coal, liquids, and gas. Natural gas has an Table 3: Emissions in power applications, by
emissions profile that is about 50% lower than energy source
coal and about 20% lower than liquids, making
switching from coal and liquids to natural gas in
Direct emission
power generation a way to significantly reduce
Energy source factor
emissions.
(Mt CO 2-eq/ TWh)
There are multiple pathways to drive down the
emissions in natural gas further. One primary Coal 0.8
method involves implementing carbon capture
technologies (CCS and CCUS), which are pivotal for
the success of the energy transition at large. Another
Liquids 0.5
pathway is reducing the carbon content of the fuel
through the deployment of green or low carbon gas
technologies. This includes the utilisation of
renewable natural gas or biomethane, hydrogen, and Gas 0.4
other potential emerging forms of low-emission
gaseous fuels. Further exploration of these strategies Source: IPCC AR6
can be found in Chapter 2.
6
Includes bioenergy, other renewables, other fossil fuels and net imports.

Figure 47: Coal and gas in the European power mix Figure 48: Power generation and emissions from
coal and gas in Europe
Percent of coal -gas-mix MWh (left axis), Megatonnes CO2 eq. (right axis)
100%
1,600 1,000
90%
-16% 900
1,400
80%
800
70% 1,200
700
60% 1,000
G> C 600
-22%
50%
800 500
40%
400
600
30% 300
400
20% 200
10% 200
100
0% 0 0
2016 2017 2018 2019 2020 2021 2022 2016 2017 2018 2019 2020 2021 2022
Power generation from coal and gas (left axis)

Gas Coal Power emissions from coal and gas (right axis)
Figure 49: Coal and gas in the North American Figure 50: Power generation and emissions from
power mix coal and gas in North America
Percent of coal -gas-mix MWh (left axis), Megatonnes CO2 eq. (right axis)
3,500
100% -5%
2,000
90% 3,000
80%
2,500 1,500
70%
-13%
60% 2,000
G
50% 1,000
1,500
40%
30% 1,000
500
20%
500
10%
0% 0 0
2016 2017 2018 2019 2020 2021 2022 2016 2017 2018 2019 2020 2021 2022
Power generation from coal and gas (left axis)
Gas Coal
Power emissions from coal and gas (right axis)
Figures 47 and 48 pertain to Europe, with Figure 47 illustrating the coal-gas mix for power
generation and Figure 48 showing the power and related emission generated from coal and gas.
Figures 49 and 50 focus on North America and showcase the same contents. As shown in Figure 49
and 40, both Europe and North America have reduced power generation from coal and gas, but
related emissions have decreased more substantially than power production. This is due to a shift in
their coal-gas mix, as both regions increasingly favour gas over coal in the power mix, as evident in
figures 48 and 50. The effect of having higher proportion of gas in power mix on emission reduction
while maintaining stable power generation is particularly noticeable in North America between 2021
and 2022. In this period, North America increased its fossil-based power production while reducing
related emissions. This can be attributed to a higher utilisation of gas in power generation, driven by
Henry Hub consistently remaining at or below the lower end of the switching band throughout 2023,
making gas a more economical option than coal.

Development trends
of low carbon gases
Low carbon gases are a critical scaling of low carbon gaseous speed and scale are still far
component of decarbonising the energy. 2022 has seen an behind what is needed for the
consumption of gas, and a increase in capacity and a higher energy transition and for the
necessary building block in a level of project announcements, world to develop in accordance
successful energy transition, sending a positive sign about this with lower global warming
which will require significant market segment. However, the scenarios.
Blue hydrogen saw limited growth

considering spiking natural gas prices
Currently, most of the world’s
hydrogen is produced using Figure 51: Global blue hydrogen nameplate capacity, split by region
natural gas, and blue hydrogen,
which is decarbonised natural gas Million tonnes hydrogen
based, has a significantly larger
share of the nascent low carbon 4
hydrogen market compared to
green hydrogen. This is largely
3.0 3.0 3.1
due to its favourable economics
3
and an already established supply
chain. The competitiveness of 2.5 2.5 2.5 2.5
blue hydrogen7 faced challenges
amid the elevated natural gas pric-
2
es in 2022. However, it remains an
attractive option to produce low
carbon hydrogen and is cost-
competitive compared to green 1
hydrogen, as was the case even
in the high-priced natural gas
environment in 2022. Normalising
natural gas prices in 2023 further 0
strengthen its business case. Blue 2016 2017 2018 2019 2020 2021 2022
hydrogen projects financed in North America Middle East Asia Europe
2023 are on average 59% cheaper
to produce than green hydrogen Source: Rystad Energy
according to a 2023 analysis done
by Bloomberg NEF. This has driven H2Perth in Australia, and Hydrogen As of September 2023, blue
European corporations to include to Humber Saltend in the United hydrogen remains small but with
blue hydrogen in their hydrogen Kingdom. During the first half significant potential, both
strategies, where for instance of 2023, a total of around 1.4 through retrofitting of grey
RWE announced plans to offtake MTPA of nameplate capacity for hydrogen facilities and greenfield
blue hydrogen from Equinor in blue hydrogen projects has been projects. Most of the blue hydro-
January 2023. Significant green- announced, which would result gen nameplate capacity is concen-
field blue hydrogen projects are in an increase of 45% of total trated in the United States and
also emerging in other parts of nameplate capacity from 2022 Canada, with 49.7% and 24.6%
the world, seen by projects like levels if realised, indicating strong of total annual blue hydrogen
Baytown CCS and H2OK in the US, momentum in the segment. production, respectively. For a
7
Blue hydrogen is produced by splitting natural gas into hydrogen and CO2, where the CO2 is captured and stored through CCUS.

deeper exploration of expected hydrogen facility to start received certification for

future low carbon gas and CCS operations, contributing an production of blue ammonia in
developments, see Chapter 2 additional 70 kilo-tonnes 2022, and the company had its
and 3. hydrogen nameplate capacity. first shipment of 25 kilo-tonnes of
blue ammonia to South Korea in
In the United States, the Inflation December the same year. During
Reduction Act (IRA) offers Ammonia is a hydrogen carrier the first half of 2023, the
carbon emissions tax credits which that can be used for transportation company has expanded both
improves the competitiveness of and storage of hydrogen. It is production and export routes,
all hydrogen production methods, produced through synthesis and is now exporting 138 kilo-
although green hydrogen receives combining hydrogen and tonnes to countries like China,
the highest share of incentive. nitrogen, can be shipped as liquid South Korea, and Japan. In 2023,
In contrast to the United States, or solid, and then cracked back to Saudi Arabian company SABIC in
Asian markets like South Korea hydrogen at the consumer. Blue conjunction with Saudi Aramco
and Japan showed no strong ammonia as a carrier for blue started the SABIC-Aramco blue
preference for production hydrogen has also gained traction ammonia project, which in
method of low carbon hydrogen. in the first half of 2023, with April 2023 shipped the first
In 2022, the Chinese project Saudi Arabia driving the project independently certified low
Sinopec Qilu Petrochemical CCS developments this year. The Saudi carbon ammonia for use in
was the sole additional pure blue Arabian mining company Ma’aden power generation in Japan.
The green hydrogen sector is put in the centre of new legislations

The pipeline of green hydrogen8
projects has steadily expanded in Figure 52: Global green hydrogen nameplate capacity, split by
recent years, with growth seen region
in standalone hydrogen projects
and those that use the generat- Thousand tonnes hydrogen
ed hydrogen to make other end
80
products, such as green ammonia.
Green hydrogen current name-
65.2
plate capacity remains relatively
small-scale, accounting for about 60
2.1% of decarbonised hydrogen
capacity in 2022. Nonetheless,
its growth is substantial, with 41.2
annual nameplate capacity having 40
doubled each year since 2020. In
2022, more than 20 kilo-tonnes 25.0
of new nameplate capacity were 19.4 20.6
added globally. From January 20 15.5
to September 2023, roughly 30
6.7
kilo-tonnes of new capacity have
been added, all from assets in 0
China, with the Kuqa Green 2016 2017 2018 2019 2020 2021 2022
Hydrogen Project accounting
North America Europe Asia South America
for 20 kilo-tonnes of this
Australia Africa Middle East
increase.
As with the case for blue
ammonia, also green ammonia power generation. In 2022, by Fertiberia's ammonia plant in
has gained traction recently for green ammonia’s nameplate Spain. In the second quarter of
applications like hydrogen capacity grew by around 19 kilo- 2023, the green ammonia
carriage, industrial feedstock, fuel tonnes from nearly negligible project NEOM in Saudi Arabia
substitute and for direct use in level in earlier years, contributed reached FID. The FID is currently
8
Green hydrogen is produced through electrolysis of water.

the biggest for green hydrogen making green hydrogen cheaper met by 10 million tonnes of
in the world, marking a milestone than blue or grey versions in the domestic hydrogen production,
for the hydrogen sector as the short term. 6 million tonnes of imported
first gigawatt-scale green hydrogen, and 4 million tonnes
hydrogen project to reach this The Act also introduces a 30% of green hydrogen from
stage. Upon completion in 2026, investment tax credit for ammonia (and derivatives)
the 8.4 billion USD project is zero-emission projects, with the imports. The EU hydrogen
expected to produce 1.2 MTPA of possibility of higher incentives demand target of 20 million
green ammonia. based on local conditions. In tonnes in 2030 compared to
Europe, the REPowerEU initiative the current global green
While the capacity increments signalled that green hydrogen hydrogen nameplate capacity
were modest, 2022 saw the is to be central in address the of 71 kilo-tonnes, results in a
implementation of several pressing climate crisis in the EU. required increase in production
policies that significantly As such, the plan envisions a capacity of about 280 times the
bolstered the economic feasibility drastically increased green current global levels. The plan
of green hydrogen. In the United hydrogen demand target would be backed up by the
States, the IRA was introduced compared to the previous European Hydrogen Bank,
with a series of tax credits. While Fit-for-55 scheme, boosting it providing financial incentives
benefiting all types of hydrogen, from a projected 7 million for green hydrogen producers.
the policy offers additional tax tonnes to 20 million tonnes by Details regarding this policy
credits for hydrogen from 2030. The ambitious new will be further discussed in
renewables or nuclear, potentially demand target is expected to be Chapter 3.
Renewable natural gas or biomethane is

small-scale but continues to see strong growth
Biomethane, also called 35 Bcm by 2030. North America mentioned earlier, the region is
renewable natural gas, provides has an additional biomethane pro- expected to keep growing rapidly,
a pathway for reducing duction capacity of around 4 Bcm as one of the actions proposed
emissions by substituting planned and under construction in REPowerEU is for Europe to
natural gas through capturing as of September 2023. Current- scale up its annual biomethane
and utilising methane or biogas ly, the majority of production is production, diversifying away
from decomposing waste, such as concentrated in Europe, and the from Russian gas supplies. This
landfills or manure, which would region saw the largest increase would mean a required increase in
otherwise be emitted into the in installed capacity in 2022. European supply of almost 9 times
atmosphere. It therefore provides Throughout the year, 144 new compared to current own produc-
high emission-reducing value plants were added, increasing tion levels. As of September 2023,
by utilising methane emissions capacity by 0.2 Bcm. The United the United States operates around
produced by other parts of the States has the largest biome- 1000 plants producing about 4
economy, including agriculture, thane production coming from Bcm yearly, growing at a slightly
to produce biomethane. After one single country, and in 2022, lower rate than Europe combined.
capture, the biogas is upgraded 17 plants came onstream in the Although still in its infancy, Asia
and purified to yield biomethane, country, presenting 0.08 Bcm in continues to be the most promis-
which can directly substitute additional volume. Regarding the ing growth supply market, with its
natural gas within the existing choice of feedstock, Europe has abundant feedstock resources and
infrastructure, with no retrofitting experienced a noticeable trend increasing energy demands. In Chi-
required. towards the utilisation of agricul- na, Air Liquide started operation
tural residues, organic municipal of a biomethane facility in Huai’an
Globally, estimated biomethane waste, and sewage sludge, while City in 2022, which feeds the gas
nameplate capacity stood at North America has been mainly grid of the city. However, despite
around 7 Bcm in 2022, accounting using organic municipal waste. substantial investment from the
for about 0.2% of global gas central government, the market
demand this year. However, the As of September 2023, Europe is has not progressed as many
potential is much greater. Europe, still the most dominant region in anticipated.
in alignment with REPowerEU, the market, with more than 1200
aims to scale up annual operating plants representing The main value proposition for
biomethane production to almost 4 Bcm of yearly supply. As biomethane is its capability to

displace traditional natural gas will be getting stricter in the targets, as illustrated through
in various industrial applications future, increasing its competitive- for instance the scaling need
and buildings, assuming that ness. However, a significant need for European supply to meet
carbon taxes and the carbon for acceleration and scaling of 2030 targets set out in
market regulatory environment supply is needed in order to meet REPowerEU.
Synthetic methane has gained traction

recently through several pilot projects
Synthetic methane or e-methane decarbonise their natural gas producing e-methane that in
is another low carbon gas that is consumption through synthetic turn can be transported to and
gaining attention, and as for methane and has set targets for distributed in Japan using
biomethane, it is especially synthetic methane uptake in existing LNG and natural gas
interesting as it could substitute existing infrastructure of 1% by infrastructure. In July 2022, as
natural gas in its applications 2030 and 90% by 2050. Tokyo part of a pilot project, a
without any need for change Gas, Japan’s top city gas partnership including Engie
in infrastructure. E-methane is supplier, began a trial in June conducted the first injection of
produced through using surplus 2022, aimed at producing synthetic methane into the
supply of renewable energy to e-methane to replace 1% of the French gas distribution network.
produce green hydrogen and city gas volume by 2030. Further- If breakthroughs to reduce costs
combine this with either carbon more, the company is conducting can be achieved, e-methane
from direct air capture (DAC) or feasibility studies in Malaysia with could prove to be a major
carbon capture from industrial Sumitomo and Petronas, and in technology for decarbonising the
sites. The e-methane technology North America and Australia with natural gas supply. However,
is still in early stages, and current Mitsubishi. The Japanese gas both scale, technology, and
projects consists of pilots to test company Osaka Gas has partnered cost are challenges which
viability and commerciality. with Marubeni and Peru LNG e-methane will need to
in Peru and Santos in Australia overcome for wider adoption
For instance, Japan aims to investigating the possibilities of to be achieved.
The historical evolution of

energy policy priorities through
the energy trilemma lens
The energy trilemma refers to future demand changes or accomplished varies due to
the balance between the developments, and that is factors like geography, finances,
often-conflicting energy policy equipped to manage external resource availability, geopolitics,
priorities: ensuring energy risks. The latter is usually accom- and stakeholder interests.
security, affordability, and plished through energy system
sustainability. Security refers to planning. Affordability means that In the period following the 2014
having reliable, uninterrupted energy is not only available, but oil price plunge triggered by the
availability of energy whenever it also affordable for consumers. abundance of the United States
is needed. In the short term, this Sustainability requires that energy shale production, the industry
could mean an energy system production and use minimise focus shifted to lowering energy
that delivers stable energy to harm to the planet and future production costs in a corrected
consumers in the time and generations. Ideally, energy policy market. At the same time, global
quantity it is needed. In the long should aim for maintaining energy policy emphasis generally shifted
term, it means providing energy systems that balance the sides of towards the energy transition,
supply that develops in trend with the energy trilemma triangle, with decarbonisation gaining
demand, in anticipation of any but how this balance can be momentum after the signing of

Figure 53: The energy trilemma Figure 54: Effects of recent events
Security Security
Security Security
Russia-Ukraine war
Energy
Energy trilemma Energy Sustainable
energy policy
trilemma trilemma
Global warming Energy price spike
Sustainability Affordability Sustainability Affordability

ustainability Sustainability Affordability Affordability
2015 Paris Agreement. However, dataset. Lastly, the Russia-Ukraine achieve a 45% renewable share
as a general trend, many conflict underscores the need for in final energy consumption mix
decarbonisation policies favoured dependable and diversified by 2030 from the current level of
measures on the side of energy energy sources. This focus has about 16%. This coincides with its
supply, including restricting driven nations to establish new legislation to be fully independent
fossil fuels, over demand side energy partnerships and shift of Russian gas by 2027.
management, and a lack of a away from traditional suppliers
global emissions pricing regime in 2022 and demonstrated that To reach these targets, the EU has
is a stark testament to that when energy security and focused on increasing short-term
imbalance. This contributed to affordability are compromised, gas supply from different
a growing disconnect between sustainability priorities are suppliers like the United States
supply and demand evolution, difficult to maintain. and Norway, as well as exploring
with increasingly restricted supply options in Egypt and Israel. The
starting to lag the unrestricted Europe was forced to shift its short-term approach hinges on
demand. The Covid-19 pandemic focus from sustainability to achieving the EU 2030 target
further worsened inflationary security following the of reducing its total natural gas
pressures, where strained Russia-Ukraine conflict. This demand by 50% (even though this
global supply chains coupled resulted in both a delay in coal ambition still has to translate into
with an unanticipated rapid post- phase-out and to an increase in an actual plan, since the latest
lockdown surge in demand set spot LNG imports to secure ENTSOG scenarios of 2022 saw a
off the rise in energy prices in short-term reliability. Further, the reduction of only about 24% be-
2021. In 2022, the Russia-Ukraine region is planning to electrify its tween 2021 and 2030). The policy
war took the supply tightness to energy system and expand renew- strategy is focused on avoiding
a global crisis level, culminating able power generation to rein- excess after 2030, and arguably
in highest ever price spikes. This force energy self-sufficiency and prioritising the risk of stranded
prompted nations to prioritise reduce dependency on imported assets over the risk of under-
affordability, demonstrated by fuel. Here, the former represents supply if targets fall short of the
substantial growth in coal use, as a conflict between sustainabili- 50% reduction in demand that
key countries in Asia and Europe ty and security, while the latter the policy envisions. There are
looked to more affordable speaks to a synergy between also plans to repurpose
alternatives. It was also seen in the two dimensions. Currently, existing gas infrastructure for
the strengthened energy electricity represents about 23% clean hydrogen in the future.
consumer subsidies. For instance, of Europe’s final energy Europe's future demand for
the Indonesian government consumption or around 2,478 natural gas is highly uncertain,
increased its energy subsidies by TWh in the EU and going forward, given the aim to transition to low
39% in 2021 to IDR 243 trillion, it is forecasted by the European carbon gases and hesitance to
and Europe has cumulatively Commission to increase to about sign long-term LNG contracts.
spent close to 651 billion EUR on 33% or 2,687 TWh in 2030 in However, the technical and
subsidies from 2021 September to accordance with REPowerEU. economic feasibility of replacing
2023 June, according to a Bruegel The REPowerEU targets aim to 50% of natural gas demand within

six years faces significant

uncertainty. Primarily, the Figure 55: Gross inland consumption by fuel in 20199 and in the
construction and modernisation REPowerEU scenario10
of energy infrastructure is a
time-consuming and capital- TWh
intensive endeavour. Even for pro-
jects that can complete construc- 18,000
Total: 16,473 TWh
tions within a year, such as on-
shore wind farms and solar plants, 16,000
11%, Solid fuels
the entire development process
usually lasts four to eight years. 14,000 Total: 12,796 TWh
14%, Nuclear
Interconnection is one of the 9%, Solid Fuels
12,000
most critical and difficult phases 16%,
in the development phase as the Renewables 13%, Nuclear
10,000
grids get increasingly congested.
According to Lawrence Berkeley 24%, Natural 34%,
8,000
National Lab, the typical gas Renewables
interconnection assessment
6,000
duration from request to
11%, Natural gas
agreement in the United States 4,000
was 35 months (just shy of three
35%, Liquids
years) in 2022. Additionally, in 2,000 33%, Liquids
order to triple the renewables
capacity and double electrification 0
of the energy system, it would be 2019 2030 REPowerEU
necessary to expand the electri-
cal transmission and distribution Source: European Commission; EuroStat; Primes
grids. According to the IEA, the
average lead time to construct can be seen amid recent events, increasing coal capacity. Gas could
an overhead transmission line with several cases of gas to coal provide a valuable lifeline for Paki-
is 10 years11. The EU’s push for switching, and large energy stan in achieving security, afforda-
security and sustainability through subsidies focused on keeping bility and sustainability if policies
renewables has also unveiled new energy affordable. In a bid to prioritise long term LNG purchase
concerns as critical materials and lower power generation costs and agreements over volatile spot
supply chains are highly concen- enhance security, Pakistan has an- market procurement. Large Asian
trated geographically outside nounced that it will not build new economies like China are expand-
Europe, introducing similar secu- gas-fired power plants in the coming their coal-fired
rity risks. To reduce security risks ing years, and plan to quadruple generation, with 115 GW of
and bolster competitiveness, the its domestic coal-fired capacity to approved coal capacity in 2022.
EU introduced the Green Deal 10 GW in the coming years, from Coal remains a key energy source,
Industrial Plan to scale manufac- 2.3 GW. A shortage of gas, which standing at 56.2% of the power
turing and technology capabilities accounts for 33% of the country’s mix in 2022, underpinning China’s
in its pursuit of net-zero. However, power output, plunged large continued focus on affordable and
challenges such as prolonged lead areas into hours of darkness in reliable energy. However, coal-
times for local production, strained 2022 during surges in global LNG fired generation has led to poor
global supply chains, and soaring prices after the Russia-Ukraine air quality and severe pollution,
inflation are slowing decarbonisation conflict made LNG unaffordable prompting China’s “Blue Sky”
efforts, making natural gas more for Pakistan. policy in 2017, which promotes
likely to have continued presence in coal to gas switching to improve
the European energy mix. While Pakistan aims to reduce urban air quality. The policy
emissions by 50% against its 2015 resulted in 25 million rural
Across Asia, an evident shift baseline, this will be challenging households switching away from
towards security and affordability with the upcoming plans of coal for heating in the heavily
9
Gross inland consumption refers to primary energy consumption in the EU, excluding international maritime bunkers. Primary
energy consumption has no direct renewable targets by REPowerEU, while final energy consumption has targets of 45% by 2030.
10
Units are converted using IEA’s factor of 1 Mtoe = 277.8/23.88 TWh. Solid fuels refer to coal and coal derivatives, according to the
European Commission.
11
IEA, Average lead times to build new electricity grid assets in Europe and the United States, 2010-2021.

polluted regions by the end of billion USD, which brings into relies on rudimentary cooking
2020, of which 52% opted for question the substantial means such as coal, charcoal, and
gas, 38% for electricity, and the financial commitments required agricultural waste. Natural gas can
remaining for centralised heating for the transition to take place. help to accelerate the uptake of
and renewable sources. Gas is Availability of capital amid a clean cooking, though this opts
expected to continue playing an period of high inflationary for the development of access
important role in China’s energy pressure and cost escalation could infrastructure.
mix, mainly in the form of a threaten economic stability.
dispatchable and flexible source. In conclusion, the energy trilemma
In contrast, other Asian countries, In developing regions such as highlights the challenges and
including Singapore, South Korea, Sub-Saharan Africa, poor energy shifts in policies to balance
and Japan, have largely relied on access has underpinned the lack security, affordability, and
energy imports, accounting for of energy security. According to sustainability in energy systems.
over 80% of their domestic energy the World Bank estimates, almost Sustainability cannot be fully
consumption. These countries 800 million people lacked access realised without the important
are major importers of coal and to electricity globally in 2021, pillars of security and affordability,
gas. Singapore, for instance, 600 million of them in Africa. This and therefore all three need to
derived over 95% of its power was following the cost-of-living be in balance. Natural gas and
from natural gas in 2022. Despite crisis post Covid-19, which made low carbon and renewable gases
the reliance on imported coal electricity more expensive emerge as key energy sources in
and gas, these countries mitigate globally. Ensuring access to balancing the energy trilemma. Gas
energy supply security risks energy for impoverished regions offers security that can bolster
through long-term LNG contracts is crucial for driving economic development and industrialisation
and diversified sources, including development and industrialisation. in developing regions overcoming
countries like Australia, Indonesia, For this to take place, a massive poverty. For areas that rely heavily
the United States, Colombia, and additional energy demand will on coal, gas provides similar
South Africa. require a reliable and affordable security and affordability,
energy source. Natural gas, with enhancing sustainability by
The shale revolution has taken a progressively decarbonised addressing air quality problems
the United States from being the gaseous energy mix in the from coal use and reducing
world's most significant energy coming years, can meet this need emissions, while making the grids
importer to a significant energy as gas can serve as a source of more resilient to support the
exporter from 2020. This has led heat, power, and feedstock massive scale-up of renewables
the country to lean comfortably for critical industry - including needed to reach transition goals.
on its own energy production in fertiliser to provide food security For developed regions looking to
recent years, despite the energy and steel and cement to build transition to renewables in a much
crunch that affected regions such roads and modern buildings. shorter term, natural gas and
as Europe and Asia since 2021. Though rural parts of Africa are low carbon and renewable gases
Albeit some reaction to a rise in exploring the option of building serve as flexible and dispatchable
domestic gas prices was PV microgrids, that is by no means source tackling intermittency,
observed in the United States as able to sustain heat and power- enhancing the reliability of grids,
well. A clear shift in focus towards intensive industrial operations and fostering competitive
sustainability is evident through such as running a cement or industry decarbonisation.
the enactment of the IRA. The fertiliser factory. On the Furthermore, these gases can
IRA is expected to accelerate the sustainability front, there are still exploit existing infrastructure's
energy transition, emphasising sus- significant shares of industrial adaptability, widening the range
tainability while preserving energy sectors around the world – of options for the energy
security by incentivising the scale- especially Asia – that use coal for transition while helping to
up of domestic value chains for power and heat, where gas can reduce its cost and ensuring
green industries and technologies. serve the same purposes, and futureproofing of needed
The total bill of the IRA is with lower emissions. Additionally, investments towards strengthening
anticipated to be nearly 800 nearly a third of the world still of supply.

2 / 2030 and beyond –
assessing the assumptions
about future gas demand
and outlooks
2 / 2030 and beyond
This chapter evaluates the future scenarios of natural balance in global gas markets, particularly with the
gas demand leading to 2030 and beyond to 2050. rising global requirement for flexible and reliable
Despite the remarkable uncertainty across existing energy amidst increasing extreme weather challenges
energy transition scenarios, natural gas is expected to energy systems.
to remain a significant participant in global energy
markets in the coming decades. However, the level Furthermore, this chapter explores future natural gas
of future natural gas supply has been largely left to demand scenarios and some of the uncertainty bands
chance. The very large difference in levels of across different transition scenario assumptions to
anticipated demand across different scenarios – draw attention to the very real potential security of
including those that project such deep demand supply implications, particularly as 2030 draws closer.
reductions that no new natural gas projects are This chapter seeks to zoom in on what various
needed anywhere in the world today – make it very scenarios mean for the gas industry and its
challenging to plan investments, while the increasingly stakeholders (governments, financial institutions,
restrictive policy environment has raised the cost of and energy companies), and more importantly, for
these investments. Meanwhile, the current level of consumers. The chapter utilises data and scenarios
natural gas and LNG supply planned and expected to from the IEA World Energy Outlook (WEO) scenarios
be available this decade is insufficient for a resilient from 2022.
Highlights
• There is a need to develop additional gas resources, as many scenarios point towards
substantial demand for natural gas towards 2030 and beyond. Existing operational and FID-ed
natural gas production is insufficient to meet most natural gas demand scenarios. Even in the deep
decarbonisation scenarios like the 1.5-degree scenarios, around 100 billion USD of investments are
needed in 2050, and low carbon gases play an important role in this scenario. When considering a
less aggressive scenario, such as the Rystad Energy 1.9-degree scenario, the shortfall of future
supply becomes more apparent, totalling over 1,000 Bcm. Globally, there are more than 200 Tcm
of proven and probable natural gas resources, which is more than enough to cover high demand
scenarios. However, it is essential for supply to be well planned and built out ahead of time to
reduce the risk of impending global shortages, potentially threatening energy security,
affordability, and sustainability, and to avoid an energy crisis, as seen in 2021 and 2022.
• Deep decarbonisation scenarios call for massive renewable energy and electrification
investments, posing capital availability challenges. Balancing both investments while maintaining
the pace of natural gas developments adds risk to both existing and future energy systems and calls
for sound policies and incentive-based frameworks to facilitate sustainable development. Scarcity
of capital may delay renewable energy adoption and divert capital away from essential gas
developments that would cause major turbulence in energy markets in the current and coming
decades. Hence, there is a need for integrated planning to ensure investment signals are not
disconnected from reality, and sufficient capital is available for the investments.
• Gas production of operational and underdevelopment projects is expected to fall short by

1,000 Bcm in 2050 from more than 4,000 Bcm in 2023 due to natural decline. The output volumes
are projected to decline to 3,134 Bcm in 2030, and further decline to 1,849 Bcm in 2040, followed
by a decrease to just under 1,000 Bcm, falling to 974 Bcm in 2050.

2 / Looking to 2030 and beyond
Uncertainty in future
gas demand scenarios
Figure 56: Global gas demand scenarios from various institutions12
Bcm
6,000
IEEJ
Reference Case
5,000 Rystad Energy
2.2-degrees

(2022)
Rystad Energy
3,000 1.9-degrees
Announced Pledges
(2022)
2,000 Rystad Energy
1.6-degrees
Net Zero
1,000 (2022)
Rystad Energy
1.5-degrees
0
2010 2015 2020 2025 2030 2035 2040 2045 2050
Sources: IEA; IEE Japan; Rystad Energy
A wide range of perspectives In the context of energy scenarios following text are built on
have emerged outlining the analysis, it is important to highlight assumptions requiring significant
potential trajectory of future the different methods in behavioural changes and
natural gas demand and supply modelling the scenarios. commercialisation and
needs towards 2030 and beyond. Forecasted scenarios are widespread deployment of a
In this section, we assess eight forward-looking projections based wide range of emerging, new,
distinct scenarios for natural on actual historical data, current and existing technologies, both
gas demand: three by the trends and policies shaping the in the private and public spheres
International Energy Agency projection (IEA Stated Policies, globally. Failure to achieve
(IEA), one by The Institute of Announced Pledges, IEEJ these behavioural changes or
Energy Economics, Japan (IEEJ) Reference case). On the other deployment scales could lead to
and four by Rystad Energy. Each hand, back casted projections a deceleration in decarbonisation
scenario highlights the ongoing (IEA Net Zero, Rystad Energy efforts and thereby different
and future need for gas in the scenarios) start with an assumed trajectories across various
energy system, even in future outcome, such as specific sectors, including power, industry,
scenarios where a substantial emission reduction and energy buildings, and transportation.
integration of renewable energy system characteristics, and are Long-term back cast modelling
is anticipated. Given that all modelled backwards to determine is based on a set of critical
scenarios have varying underlying possible trajectories and assumed assumptions about technology
assumptions, there are a wide changes needed to arrive at that paths that it employs to align
range of outcomes across the future from the present system. the current state to an outcome
scenarios, highlighting the over several decades from the
uncertainties surrounding the For example, the scenarios current situation. It is a highly
outlook for gas demand. outlined in Figure 56 and the valuable tool to use as a
12
All historical and forecasted values are scaled to be identical in 2022 to account for different heating and caloric
assumptions. This figure shows the 2022 version of NZE, APS, and STEPS and the NZE 2022 version from the IEA WEO
2022 presented is quite similar and aligned to the version published on 26th September 2023. Any reference to the IEA
NZE in this report is connected to the 2022 edition of the NZE scenario.

guide; however, it is not a energy supply planning. This is avoid shortages and price shocks,
perfect predictor of technology particularly true for natural gas, further emphasising the need
evolution, and it is also not a where production needs to be for long-term system planning of
suitable replacement for developed ahead of demand to energy.
Table 4: Selected assumptions across scenarios13
IEA: IEA’s three scenarios complete attainment of technology. It assumes a gas

comprise the Stated Policies country-level goals for electricity growth rate of about 1.3% to
Scenario (STEPS), the Announced access and ‘clean’ cooking. In the continue forward with increased
Pledges Scenario (APS), and the APS, low-emissions hydrogen adoption of renewables towards
Net Zero Emissions by 2050 production rises to reach 30 million 2050. The scenario predicts a
Scenario (NZE 2022). STEPS is tonnes of hydrogen per year in continued reliance on traditional
aligned with the 2.0-degree 2030. The NZE (2022) is aligned energy sources in consumption
scenario under the Intergovern- with the 1.5-degree scenario under and energy demand driven by
mental Panel on Climate Change’s the IPCC AR6 carbon budget and India, the Middle East, ASEAN, and
(IPCC) Sixth Assessment Report envisions a world in which all CO2 North Africa. Natural gas is also
(AR6) carbon budget and exam- emissions released to the atmos- widely assumed as the stabiliser
ines how global energy markets phere are offset, effectively result- amid energy security concerns and
could evolve if countries follow ing in net zero emissions by 2050. serves as a key energy source
through on announced strategies This requires tremendous effort in replacing coal in large coal
and targets related to energy energy mix transition, with renewable consuming countries throughout
production, consumption, and energy and green fuels rapidly Asia. Gas is also assumed to be the
emissions reduction. The APS is replacing traditional energy and largest source of electricity
aligned with the 1.8-degree wide adoption of carbon capture generation in 2050. Natural gas-
scenario under the IPCC AR6 and storage technology. Under the based blue hydrogen and blue
carbon budget and assumes IEA NZE (2022), low emission fuels ammonia will play a crucial role in
countries meeting national comprise 20% of all liquid, solid and the decarbonisation of fossil fuels.
targets towards 2030 and gaseous fuels used worldwide in As such, the IEEJ stresses the
beyond. The APS provides an 2030 and 65% by 2050. need for the natural gas market
outlook for exporters of fossil to be stabilised to ensure the
fuels and low emissions fuels such IEEJ: The IEEJ Reference Case introduction of blue hydrogen/
as hydrogen, shaped by what full scenario reflects the anticipated ammonia as their competitiveness
implementation means for global effects and progress from current in materialising is largely
demand and the timely and energy policies and available dependent on the price of gas.
13
Final energy consumption growth percentages are represented as the compound annual growth rates (CAGR) between 2021 to 2030, and
2030 to 2050. In 2022 the power generation was made up of 22% natural gas and electricity made up 17% of total final energy consumption.

Rystad Energy: Rystad Energy’s and 2,900 Bcm respectively. where around 65% is biomethane,
four scenarios anticipate what The IEA’s STEPS is positioned mostly injected into existing gas
would be required to limit between Rystad Energy’s 1.9- distribution networks. Despite the
global warming to 1.5 degrees, degree and 2.2-degree scenarios. decline, natural gas continues to
1.6 degrees, 1.9 degrees and Looking towards 2030, the remain a critical source of power
2.2 degrees. The scenarios are in industrial sector emerges as the system flexibility and industrial
accordance with the greenhouse primary driver of gas demand feedstock, contributed by
gas emissions budgets in IPCC growth, particularly in emerging potential synergies with CCUS.
AR6 which looks at limiting global economies across Asia and Africa.
warming to certain degrees STEPS also assumes larger scale Rystad Energy’s 1.5-degree
Celsius with a 50% probability. Each electrification. In the IEA’s APS, scenario envisions a net-zero
scenario has a varying assumed there is an accelerated growth in society by 2050 and is aligned
optimal resource mix to stay renewables, resulting in a reduction with the IEA’s NZE (2022). As such,
within the designated carbon of total gas consumption within the pace of decline in natural gas
budget. As the scenarios are the power sector, despite the in both the NZE (2022) and Rystad
based on emission budgets, there incorporation of supplementary Energy 1.5-degree is relatively
is a range of outcomes associated capacity to bolster flexibility similar, with only slight varia-
with the pace of curbing various requirements. In addition, the tions post-2035, likely driven by
fossil fuels to meet the budgets. shift in demand directly gravitates differences in methodology and
The scenarios showcase Rystad towards renewables or other low assumptions. The Rystad Ener-
Energy’s view on the most likely carbon emission alternatives, gy 1.6-degree scenario follows
pace of transition for all energy thereby bypassing coal-to-gas a similar short-term trend as the
sources. switching. Additionally, global clean IEA STEPS, where gas demand is
hydrogen production reaches 30 expected to increase and peak
While most scenarios show a million tonnes per year in 2030, in 2030 at 4,267 Bcm, before de-
long term gradual downward enabling natural gas substitution clining to 1,854 Bcm in 2050. The
trajectory in natural gas demand in the industrial sector, especially short to medium term increase
towards 2050, the rate of decline in refineries. By 2050, clean in gas demand is driven by coal to
varies wildly across scenarios. IEEJ hydrogen trade patterns are gas switching in Asia. Post 2030,
Reference Case, on the other expected to be well established, renewables are expected to grow
hand, envisions natural gas to with Australia and the Middle East significantly, replacing the share of
increase gradually towards 2050, as the largest exporting regions. natural gas in power across Europe
peaking beyond this timeframe. and North America. Additionally, al-
This is primarily driven by non- While on the most aggressive ternative lower carbon fuels such as
OECD countries led by India and energy transition side, the IEA’s green hydrogen begin to increase
Indonesia, where coal to gas NZE (2022) outlines a pathway in scale, replacing natural gas in the
switching is expected to rise. Its for the global energy sector to industrial sector towards 2050.
share in the primary achieve net zero CO2 emissions by
energy mix increases, from just 2050, requiring high investment in In Rystad Energy’s 1.9-degree
above 23% in 2021 to 24% in renewables, CCUS, hydrogen, and scenario, natural gas demand
2030, 26% in 2040 and 27% by biofuels. In the NZE (2022), nat- peaks in 2034 at 4,705 Bcm before
2050. Due to coal’s decline, gas ural gas demand falls by 20% to declining to 3,361 Bcm in 2050.
becomes the second largest fuel 2030, and is 70% lower than 2021 Natural gas is widely considered
in the mix after 2030. by 2050. By 2050, the NZE (2022) an important part of the transition
assumes 190 Bcm of natural gas towards a low carbon society in
The delta between the Rystad used in non-combustion sectors markets that are currently highly
Energy 1.5-degrees scenario and such as chemical, 100 Bcm is used dependent on higher emitting coal
the IEEJ Reference Case is about in power plants equipped with and oil. Natural gas demand contin-
4,700 Bcm, which is more than CCUS, and over 560 Bcm used ues to grow, replacing coal in Asia
the total global gas consumption with CCUS to produce hydrogen while renewables take shares from
today of around 4,000 Bcm. As and a further 150 Bcm used with natural gas in Europe, the Middle
such, massive developments in CCUS in industry. Over 25% of the East, and North America. Natural gas
gas infrastructure are required hydrogen produced in 2050 is is also set to be the main source of
in the future to meet the IEEJ converted to hydrogen-based power generation during periods of
Reference Case’s targets. fuels such as ammonia, methanol, intermittency of renewables.
Comparing it with IEA's stated and synthetic hydrocarbons. However, growth in battery
policies and announced pledges, Biogas is also assumed to reach storage capacity, accumulating to
the difference is about 1,200 Bcm more than 400 Bcm by 2050, nearly 67 TWh in 2035, supports

the case for declining use of gas sector continue to rely on America, and the Middle East.
post-2035, primarily to meet short both coal and natural gas as Global demand for natural gas
duration dispatchable needs. an affordable and practical remains on an upward trajectory
Similarly, the industrial sector solution. in the power sector until 2030,
is expected to increase its rate attributed to the transition from
of decarbonisation post-2030, Rystad Energy’s 2.2-degree coal to gas in the power sector
primarily through the uptake of scenario provides a plausible across Asia and lower investments
clean hydrogen. Clean hydrogen upper bound beyond the in new renewable capacity. Both
and ammonia are expected to 1.9-degree scenario. In the North America and the Middle
comprise around 12% of the 2.2-degree scenario, natural East see continued growth in
energy mix by 2050, from less gas assumes a central role in natural gas demand into 2030,
than 1% in 2022. However, the facilitating the transition to a low while European natural gas
uptake of replacement fuels is carbon global environment, demand declines, driven by an
gradual, as heat-intensive particularly within major natural increased pace of electrification
processes within the industrial gas markets such as Asia, North across all sectors.
Natural gas investments

still crucial in the long run
Figure 57: Annual global energy CAPEX Figure 58: Annual global gas CAPEX investments
investments across varying degree-scenarios, across varying degree-scenarios, real 202214
real 202214
Billion USD Billion USD
5,000 1,000
4,500 900
4,000 800
3,500 700
3,000 600
2,500 500
2,000 400
1,500 300
1,000 200
500 100
0 0
2010 2015 2020 2025 2030 2035 2040 2045 2050 2010 2015 2020 2025 2030 2035 2040 2045 2050
RE 1.5 DG RE 1.6 DG RE 1.9 DG RE 2.2 DG RE 1.5 DG RE 1.6 DG RE 1.9 DG RE 2.2 DG
Figure 57 showcases annual pivotal to facilitate the extensive twofold. This stark contrast
energy investments across four scale-up of renewable energy, underscores the substantial
distinct Rystad Energy scenarios: clean fuels, and CCUS initiatives financial commitment required to
1.5, 1.6, 1.9 and 2.2 degrees. mandated by this scenario. transition to a decarbonised energy
Notably, in high-renewable energy Specifically, in the1.5-degree system swiftly and aggressively.
penetration scenarios such as scenario, annual energy invest-
Rystad Energy’s 1.5-degree ments are anticipated to peak just Global renewable energy
scenario, there is a need for below USD 4.3 trillion in 2027, a investments are compared
heightened investments towards figure exceeding that of the 1.9 and to global natural gas
2030. These investments are 2.2-degree scenarios more than investments (figures 57 and 58),
14
The Rystad Energy 1.5-degree scenario has similar gas demand trajectories as the IEA NZE (2022) scenario.

Figure 59: Annual global renewable energy CAPEX Figure 60: Annual renewable capacity additions
investments across varying degree-scenarios, across Rystad Energy scenarios14
real 202214
Billion USD GW
5,000 3,000
4,500
2,500
4,000
3,500
2,000
3,000
2,500 1,500
2,000
1,000
1,500
1,000
500
500
0 0
2010 2015 2020 2025 2030 2035 2040 2045 2050 2010 2015 2020 2025 2030 2035 2040 2045 2050
RE 1.5 DG RE 1.6 DG RE 1.9 DG RE 2.2 DG RE 1.5 DG RE 1.6 DG RE 1.9 DG RE 2.2 DG
from this there is a clear call for The 1.5-degree scenario shows the majority of the renewable supply
greater gas investments in the importance of gas within the chains are concentrated in China,
long term, even for aggressive energy landscape in bridging the this may potentially introduce
decarbonisation scenarios such as transition to renewable energy similar single-source dependency
Rystad Energy’s 1.5-degree alternatives. Rystad Energy’s 1.6, risks, putting energy security at
scenario. In this scenario, the global 1.9 and 2.2-degree scenarios show risk. Additionally, the surge
natural gas investments are gas investments increasing in the in large-scale renewable invest-
hovering around 300 to 400 billion short to medium term, before ments required to meet lower
between 2023 and 2030 and then gradually declining towards 2050. temperature climate targets
declining to 80 billion USD by coincides with a period of rising
2050. This scenario also has the There is an unprecedented need investments and sentiment in the
highest level of uncertainty and for accelerated investments in oil and gas sector. It could be
faster-than-expected transition renewables to meet lower challenging to obtain adequate
away from high-emitting fossil fuel temperature targets. With capital to meet both renewable
sources. However, this scenario reference to Figure 60, the 1.5- investments while maintaining the
could call for increased gas demand degree scenario expects around pace of oil and gas developments.
and still be in accordance with the 2,800 GW of renewable capacity This adds risks to both existing and
carbon budget, e.g., faster phase additions in 2030, around 5.5 times future energy systems and calls
out of coal and switching with gas higher than the annual capacity for sound policies and incentive
would result in higher gas demand additions in the 1.9-degree scenario frameworks to facilitate
whilst meeting the carbon budget. at 497 GW. In a time where the sustainable development.
Most scenarios call for higher

natural gas production
This section compares the expected to reach 4,098 Bcm in 1,849 Bcm in 2040, followed by a
different demand scenarios with 2023. These output volumes are decrease to just under 1,000 Bcm,
producing and approved natural projected to decline to 3,134 Bcm falling to 974 Bcm in 2050.
gas supply. With reference to in 2030 due to asset maturation
Figure 61, total producing, and and natural decline. The projection In the short to medium term,
approved gas production is indicates a further decline to gas supply growth is primarily

Figure 61: Global gas demand scenarios from various institutions versus operational, approved and
discovered assets (2010 – 2050)15
Bcm
6,000
IEEJ
Reference Case
5,000 Rystad Energy
2.2-degrees

(2022)
Rystad Energy
3,000 1.9-degrees
Announced Pledges
(2022)
2,000
Rystad Energy
1.6-degrees
1,000 Net Zero
(2022)
Rystad Energy
0 1.5-degrees
2010 2015 2020 2025 2030 2035 2040 2045 2050
Abandoned Producing Under development Discovery
driven by the Middle East, notably are still required to facilitate for As of August 2023, there are more
Qatar’s North Field East expansion the growth in export and to meet than 210 Tcm of gas reserves,
for LNG exports and increased rising demand in new regions. As underscoring the availability of
non-associated gas production in shown in Figure 61, production from global gas reserves to fulfil even
Iran, Saudi Arabia, and the United “Discovered” assets is required to higher gas demands than that
Arab Emirates. The United States meet future demand. These are presented in the scenarios. That
is set to increase production from assets that have proven reserves said, prioritising the cost-effective
shale gas resources such as but have not progressed to and accessible monetisation of
Marcellus and Utica, as well as appraisal or development/FID gas is important. Gas resources
Permian Basin associated gas. stage. Even including “Discovered” that are deemed economically
In Asia, China has committed to assets, supply is still not sufficient unviable at current and forecasted
boosting domestic gas production to meet demand in the APS and prices would remain undeveloped,
through conventional onshore and 1.9-degree scenario. This is critical particularly in the current policy
shale play in the western territory to note as there is a reasonable environment, both political and
of Xinjiang, while Southeast Asia’s level of risk that assumptions and financial. In particular, there are
production is set to stabilise as policies do not deliver as still significant gas reserves in
investments offset declining fields. anticipated, resulting in higher the ground that could enter the
Potential upside is also present in than anticipated gas demand. In future gas market, seen by both
Africa, led by developments in that situation, supply could be the discovered and undiscovered
Mozambique, where force majeure unable to react quick enough for resources in Figure 62 that form
in 2021 is gradually being lifted for demand to be met, leading to a about 62% of all gas reserves
developments to resume. potential energy security crisis, worldwide, especially in South
and growing global emissions by America, Asia, and Africa. Future
In the coming decades, there is a increased utilisation of coal. As such, exploration activity and growing
call on exploration and additional it is critical to have sufficient availa- local demand could prove these
discoveries of gas projects to meet ble supply that can be leveraged to resources to be competitive and
increasing demands across all scenari- meet the uncertain surges in future demanded which in turn would
os, except the IEA’s NZE (2022) and demand. Similarly, regasification lift the demand and exportable
Rystad Energy’s 1.5-degree scenario. and liquefaction infrastructure potential in these regions.
In the NZE (2022) and 1.5-degree must be in place in vulnerable
scenarios, the existing and under de- areas in case of shortfall of local Monetisation of associated
velopment gas fields are sufficient to production or imports, as seen in gas16: Another way to bolster
meet future demand. However, mid-, Europe with the reduced Russian production, while reducing
and downstream gas investments piped-gas imports. emissions, is to monetise
15
All historical and forecasted values are scaled to be identical in 2022 to account for different heating and caloric assumptions.
16
Natural gas found within crude oil deposits, either dissolved in the oil or as a free gas layer above the oil in the reservoir.

Figure 62: Existing gas production by regions
13 %
39 % 37 %
43 %
22 % 7 Tcm 33 Tcm
42 % 36 %
51 Tcm 4% 6% 14 %
18 % 7%
32 % Europe 44 % Russia
51 Tcm
35 %
North America 37 % 32 %
8% 39 Tcm
Middle East 3%
28 %
37 % 28 %
Producing 12 %
3% 17 Tcm
South America Asia
11 % 7%
Under has over 70% of 13 Tcm 30 % 31 %
development undiscovered 28 %
natural gas 74 %
7 Tcm
Discovery resources Africa
9%
South America 30 %
Undiscovered Australia
associated natural gas, which is for associated gas, and there fuel infrastructure finance,
often flared or vented during oil are many case studies across the these investments are facing
production. This natural gas can world where associated gas ever-growing barriers too.
be captured and utilised in the becomes a viable commercial
local market, however, often the supply source. This is important for While global supply and demand
natural gas is impossible to export energy-poor regions like Africa, will eventually balance, trading is
due to lacking infrastructure. which lacks reliable electricity ac- vital for achieving regional
Advances in technology have cess yet accounted for around 10% equilibrium. Addressing country
enabled economic deployment of of global flaring volumes in 2022. and regional shortfalls involves
gas-to-liquids (GTL), gas-to-power Monetising associated gas would developing new infrastructure such
(GTP), and gas-to-chemicals (GTC) reduce flaring and venting and as pipelines and LNG facilities. To
conversion, with GTP being the contribute positively towards the delve deeper into regional balances,
most common approach. In many environment by reducing carbon the following trade balance
cases though, there is a business and methane emissions. However, sub-chapter explores the regional
case for infrastructure to be built with restrictive policies on fossil traits of future gas markets.
Future balances of trade flow

The Rystad Energy 1.9-degree would be centred in China, with Following the Russia-Ukraine
scenario is used for future trade increased piped gas imports from war, European policymakers are
balances analysis (Figure 63). Russia and Central Asia. Two major striving to reduce reliance on
Looking ahead to 2030 and Russian pipelines — the 10 Bcm Far Russian energy imports. Europe’s
beyond, Asia and Europe continue East pipeline and the 50 Bcm Power REPowerEU Strategy aims to
to be the largest net importers of of Siberia 2 — are anticipated to replace 101.5 Bcm of pre-war
natural gas. To meet the 1.9- commence operations by 2026 and Russian piped gas in the short
degree scenario transition 2030, respectively. Additionally, term with LNG and alternative
pathway, gas imports into Asia the Central Asia-China pipeline pipeline imports. Despite a
are anticipated to increase from D is expected to start operating declining trend in domestic gas
257 Bcm in 2022 to over 533 Bcm by 2026. At present, the Power production, Europe is likely to
in 2030, peaking around 2040 at of Siberia 1 pipeline is gradually remain import dependent even
725 Bcm. To support this growth, increasing its capacity to 38 Bcm as gas consumption decreases.
there is a wave of LNG import by 2025, boosting China’s piped To offset the loss of Russian gas,
terminals under construction in gas imports from 69 Bcm in 2022 Europe needs to increase LNG
the region. Growth after 2030 to 136 Bcm in 2030. imports and decrease gas

Figure 63: Gas production and import/export volumes17
Bcm
1,800 Europe Asia Australia Africa Russia Middle East North America South America
1,600 IMPORTER IMPORTER EXPORTER EXPORTER EXPORTER EXPORTER EXPORTER Balanced
1,400
1,200
1,000
800
600
400
200
-200
2023
2050
2023
2050
2023
2050
2023
2050
2023
2050
2023
2050
2023
2050
2023
2050
-400
-600
Production Demand Implied import needs Implied export potential
usage. Much of the additional Rystad Energy’s 1.9-degree of new LNG supplies are needed
LNG required will come from scenario, global LNG trade is by 2030, rising to 196.9 million
uncontracted volumes, portfolio expected to remain robust in the tonnes in 2040 and 198.1 million
players, alongside contracted short to medium term, although a tonnes in 2050. This is largely
volumes from Qatar, the United gradual decline would be expected driven by Asia, Middle East, and
States, and Nigeria. post-2040. Nonetheless, there Africa, with an accelerated pace of
is a clear call for additional LNG renewable uptake only occurring
LNG plays a key role in the global supplies even in the long term as from 2035 onwards. However,
trade balance, offering flexibility upstream assets deplete. From given the uncertainties surrounding
and reaching across regions. In Figure 64, about 48.4 million tonnes the assumptions, there are risks of
Figure 64: Potential LNG import scenario against operational and approved production (2010 – 2050)
Million tonnes LNG
800
700
600 196.9
48.4
500
198.1
400
300
200
100
0
2010 2015 2020 2025 2030 2035 2040 2045 2050
Abandoned Producing Under development Rystad Energy1.9-degrees
17
The illustration is based on information available on the competitiveness and availability of gas assets in
September 2023. Accelerated regional exploration efforts could change this picture in the future.

an even larger supply shortage, if

demand were to falls slower than Figure 65: Greenfield LNG investment by commitment/FID year
expected. (2023 – 2030)
The Middle East, led by Qatar, Billion USD, nominal 2023
will be an important region in the
60
LNG landscape. With ongoing
expansion plans at the huge
North Field, Qatar could potentially 50
boost LNG export capacity to 126
MTPA by 2030, from 77.8 MTPA as
of August 2023. Given the low- 40
cost production of North Field

East fields and shipping cost 30
advantages, Qatar is primed to
serve both European and Asian
LNG demand in the long term. 20
North America is also well

10
positioned to lead as the top
global LNG exporter in the long
term. Its gas production is projected 0
to outpace demand through 2050. 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
The strong outlook for gas demand Source: Rystad Energy
has already triggered a wave of
FIDs for gas infrastructure Avoiding future shortages of financial institutions need to
(pipelines, liquefaction, and gas hinges on investments in gas ensure that sufficient capital is
regasification) which is expected assets and infrastructure. Rystad allocated and balance the risk
to continue in the coming years. Energy estimates reveal a need of a major global under-supply
North America has the resources for around $175 billion in green- shock with a risk of under-utilised
available to help close the global field LNG investments between assets in the future. Having reserve
supply-demand gap, but 2023 and 2030 to expand LNG capacity for a secure and flexible
continued investment in gas capacity (Figure 65). The next few energy system is better than being
infrastructure will be needed to years are particularly critical, as unable to meet demand. The latter
mitigate market volatility and the LNG market is anticipated to is more damaging to economies,
periods of extreme market remain finely balanced, with livelihoods, and the environment –
tightness to achieve energy additional supply required to when economic development
security. Around 78 million tonnes cater to the growing demand, as is halted in areas with low
of FID-ed LNG capacity is expected illustrated in the figure above. To purchasing power and when
to come online in North America ensure the necessary investments dirtier alternatives are used to
between 2024 and 2027. and financing, regulators and fill the gap, as seen in 2022.
Addressing uncertainties
in future gas policies
The large range of differences in high level of risk of future supply short of what is needed to
assumptions about future imbalances. Despite recent produce sufficient supply to
natural gas demand (especially in optimism around certain LNG rebalance and ensure security in
the medium to long term), investments, the investment the global energy markets. This
coupled with a high level of growth is occurring on the back of risk means that the current energy
misalignment between near-term a prolonged period with low environment may experience
supply needs with policy and investments, and the total level future crises as seen in 2021 and
financial developments, creates a and off-take agreements are still 2022, with more severe and

frequent price and demand

shocks. This would in turn Figure 66: Green debt issuance against fossil fuel debt issuance
cause disruptions in economic
development and environmental Billion USD
consequences – especially in the
developing world, where demand 1,000
for natural gas could fail to be 900
met, and greater use of coal, oil,
and biomass use may occur. 800
700
Gas is projected to remain a key
component in the energy policies 600
of major global consumers at least
until 2050, however, there are 500
challenges and significant 400
uncertainty on how future gas
projects will be developed and 300
maintained. These uncertainties
200
encompass financing challenges,
carbon pricing, and public 100
sentiment.
0
Financing: Considering the 2014 2015 2016 2017 2018 2019 2020 2021 2022
Russia – Ukraine conflict, the Fossil fuel Green
Biden Administration announced
an agreement committing the Source: Bloomberg League Tables
United States LNG industry to
supply at least 50 Bcm of shift is driven by a substantial developers. This collaboration
additional US LNG until at least transformation in the policies can help mitigate the potential
2030, equating to around of lenders, and other financial impact of transition risks like
one-third of the EU’s gas imports enablers, aligning with both their stranded assets, facilitating the
from Russia in 2021. This is widely net-zero scenario assumptions development of necessary
regarded as a window of and targets set by their respec- assets and infrastructure, while
opportunity for US LNG project tive home countries. Additionally, providing a more effective lever
developers which will require with reference to Figure 66, debt to enforce environmental
an increase in export capacity. issued for fossil fuel projects have performance.
However, on top of the struggle been on a decline and was
to secure long term off-takers to surpassed by green projects in Carbon pricing: As of August
underwrite financing, financing 2022. The inability to secure 2023, according to the World
conditions have become financing will result in delays in Bank carbon pricing dashboard,
considerably more difficult, with project FIDs, placing more stress only 23% of global greenhouse
higher interest rates underpinning on an already tight global gas gas emissions are covered by
uncompetitive project economics. market. For example, the FID of existing carbon taxes or
Though this is largely to penalise NextDecade’s Rio Grande LNG emissions trading schemes
the financing of highly polluting project has been repeatedly (Figure 67), amounting to 11.7
sectors such as coal, the gas delayed due to rising borrowing giga-tonnes18 of CO2 equivalent
industry has also been affected. and labour costs, and French bank out of the total 50.7 giga-tonnes
Leading financial institutions have Societe Generale SA withdrawing emitted in 2023. This is
taken a categorical stance, vowing as the lead bank of the project in insufficient to incentivise
to cease new project funding 2022. large-scale switching towards
for future oil and gas projects, cleaner alternative energy
especially on the production side. As such, for the needed gas sources, including gas and
For example, large banks such as projects to proceed, policymakers renewables.
ING, BNP Paribas and HSBC have should work closely with financiers
committed to seize funding for to create a more favourable Carbon pricing is a key enabler
new oil and gas projects. This financing environment for project for coal-to-gas switching,
18
The World Bank Carbon Pricing Dashboard: https://carbonpricingdashboard.worldbank.org/

Figure 67: Global carbon pricing map

Canada’s Carbon
Tax:
48 USD/ tCO 2e
*~125 USD/ tCO 2e

by 2030 EU ETS: ETS and carbontax implemented
60 USD/ tCO 2e
ETS or carbon tax under
ETS implemented other pricing under
USA’s Carbon ETSimplemented
Tax:
12 – 30
USD/ tCO 2e Carbon tax implemented
*No federal Carbon tax implemented, ETS under
carbon tax but consideration /development
some states
impose their
own taxes
Argentina ’s Carbon Tax:
Chile’s Carbon Tax:
3 USD/ tCO 2e
5 USD/ tCO 2e Australia (Safeguard Mechanism ):
11 USD/ tCO 2e
Source: Rystad Energy; World Bank
increasing the attractiveness of gas effectively. Meanwhile, carbon cautious in purchasing decisions,
as a cleaner fuel, and renewables pricing levels are globally far potentially favouring suppliers
as an emission-free energy source. below this threshold, as illustrated with lower carbon footprint.
For the world to accelerate the in Figure 67 above.
fuel switching away from emission In conclusion, there is a growing
intensive sources such as coal and The EU Carbon Border gap between the trajectory of
fuel oil, carbon pricing needs to Adjustment Mechanism (CBAM) supply development and
be widely adopted. And the price aims to addresses unequal carbon plausible demand for natural
needs to be commensurate to the taxation levels by taxing the gas that could be risky for
real cost of emissions to “untaxed” carbon emissions for economical and decarbonisation
disincentivise the use of imports into the EU. As part of developments. There is a higher
emission-intensive sources. In the EU Green Deal, the CBAM will possibility of heightened demand
Japan for example, the Ministry of apply a carbon tariff on carbon- and price shocks in the coming
Economy, Trade, and Industry has intensive imported products. EU decades – like the ones seen in
commited to reducing coal in the importers will buy carbon 2021 and 2022 – likely to be
energy mix from 32% in 2019 certificates corresponding to the driven by muted supply outlooks
to 19% by 2030, while scaling carbon price that would have and challenging financial
renewables to almost 40% by been paid had the goods been conditions in a gas market that
2030, from 18% in 2019. However, produced under the EU’s carbon seems to be highly fragile and
its current carbon tax stands at pricing rules. The measure is thinly balanced. Thus, it is crucial for
USD 3 per tonne of CO2, while the designed to reduce carbon governments, financial institutions,
IEA estimates a carbon price of at leakage and ensure a level and energy companies to align
least USD 130 per tonne of CO2 is playing field for importers and efforts and incentives to ensure
required for developed countries, the domestic producers. As such, reliable, sustainable, and affordable
for transition to take place EU importers will be more future energy markets.

Case study: The role of gas

in China’s energy transition
China, the world’s most to build new nuclear facilities After which, coal as the
populous nation and a global to provide base load power, baseload energy supply would
economic powerhouse, stands increase intermittent renewable need to gradually be phased
at the crossroads of energy energy sources, and accelerate out, with other cleaner sources
demand and sustainability. gas-fired capacity development. such as nuclear stepping up.
With a population exceeding These measures collectively aim In August 2023, the Chinese
1.4 billion people, the country’s to replace the historical reliance government approved the
energy needs are vast and on coal and diversify the construction of six new nuclear
ever-expanding. As China strives country’s power mix. reactors as part of its plan to
towards its environmental reduce carbon dioxide emissions
targets of peak carbon Historically, China has relied on by more than doubling nuclear
emissions by 2030 and carbon domestically produced coal as its power capacity this decade.
neutrality by 2060, its energy main energy source. Coal com- As of June 2023, China had
mix will certainly evolve. This prised 56.2% of the country’s 57 GW of nuclear generating
case study highlights some of energy mix in 2022 (Figure 68), capacity. The government
the recent key energy-related advancing its market share by plans to expand the scale to
policies and underscores the 0.2% from 2021. As of August 70 GW by 2025 and up to
crucial role of gas in China’s 2023, China has 243 GW of 150 GW by 2030 (Figure 69),
journey to fulfil its energy coal-fired power plants under where it is likely to become
requirements while achieving construction and permitted, the world’s largest generator
its emission reduction targets. indicating that coal will continue of nuclear energy, well ahead of
China’s power demand is set to be the primary energy source US (95 GW) and France (61 GW).
to rise in the coming decades, for the country at least until peak China has been steadily
and to cope with this, they plan emissions by 2030 is reached. expanding its nuclear fleet
Figure 68: China total energy consumption by Figure 69: China’s announced nuclear capacity
energy source (2022)19 developments
GW
GW 150
150
Non-fossil sources,
17.5% +80 GW
+80 GW
Gas, 8%
45.4 70
+13 GW
PWh Coal, 56%
57
+13 GW 70
Crude oil, 18%
57
2023 2025 2030
Source: National Energy Administration; National Bureau of Source: National Energy Administration; National Bureau of
2023 2025 2030
Statistics; National Development and Reform Commission Statistics; National Development and Reform Commission
19
Non-fossil sources include nuclear, hydropower, wind, solar and geothermal.

to provide stable, reliable,

emission-free baseload Figure 70: China power generation by type
electricity for its growing
economy. Alongside hydropower, 14
nuclear is anticipated to replace 12.2
coal as the primary baseload 12
power source, forming the core
of China’s low carbon baseload 10.0
10
capacity additions.
Under Rystad Energy’s analysis, 8

Peak carbon emissions
natural gas power generation is 5.8
expected to increase alongside 6 5.1
5.1
renewable energy generation,
from 0.3 PWh in 2022 to 0.6 4
PWh in 2030 and 0.8 PWh in 2.3
2.0
2040. The additional gas-fired 2 1.3
1.6
1.0 0.8 0.7 0.8
capacity acts as a backup and 0.4 0.3 0.6
dispatchable energy source -
in the event of a shortage of 2022 2030 2040 2050
renewable power generation,
enabling China to call on a Coal Nuclear Gas Renewables
stable source of energy with
quick ramp-up capability. Source: Rystad Energy
According to a speech made
by Huang Weihe20 at the
International High-Level Figure 71: China gas imports split by LNG and piped gas
Forum on Green and Low countries21
Carbon Energy Revolution in
Bcm
Beijing indicated that China’s
gas-fired power generation 250
is primed to reach 150 GW by
2025. This will be followed by
Piped gas expected to
a subsequent increase to 330 surpass LNG in2039
200
GW by 2040, nearly tripling the
existing 115 GW of gas-fired ca-
pacity. This is driven by the need
for more peak-shaving, driving 150
gas demand in the power sector
from 122 Bcm in 2025 to 308
Bcm by 2040, as mentioned 100
by Huang. Huang also
highlighted that the demand for
gas used either as fuel or 50
feedstock will continue to
grow until 2040, before
tapering off. 0
2020 2025 2030 2035 2040 2045 2050
This trend means that China Turkmenistan Russia Others LNG
will have to import more gas to
bridge the gap between demand
and domestic production. Source: Rystad Energy
20
Member of the Chinese Academy of Engineering, who served as vice president of China’s largest oil and gas
company, PetroChina, in 2008.
21
Others include Kazakhstan, Uzbekistan, and Myanmar.

The country has regarded pipeline (30 Bcm per year) that China’s gas imports will
domestic production as the are progressing quickly. Piped remain robust, as operational,
cornerstone of its gas supply gas imports are expected to and approved assets are not
mix, prioritising self-sufficiency, surpass LNG by the two next sufficient to meet demand.
and is unlikely to allow imports decades, as seen in the chart As such, LNG will be key in
to account for more than 50% below. fulfilling remaining consump-
of total supply in the future. In tion,and this is expected to
2022, China consumed 367 Bcm In the domain of low carbon remain robust, even in
of gas, 40%, or 146 Bcm came gases, China Southern Power decarbonisation-centric
from imports. According to Grid (CSPG) is exploring scenarios such as the
Rystad Energy’s analysis, piped options to harvest surplus IEA APS and the Rystad Energy
gas imports are expected to renewable generation for later 1.6-degree projection. China’s
increase at a faster pace as use through production of energy landscape is undergoing
China plans to expand the gas hydrogen from excess significant transformation, and
pipeline network to between renewable energy. The natural gas is expected to play
170,000 to 200,000 kilometres company has brought two a central role in ensuring grid
by 2040, from 120,000 pilot hydrogen power plants security and firming in China’s
kilometres as of June 2023. online in Kunming and pursuit of a low carbon economy.
The main suppliers of piped gas Guangzhou. Looking at China’s At the same time low carbon
to China are Russia and historical domestic gas gases could potentially provide
Turkmenistan, as developments production, LNG is required to innovative storage potential for
for the Power of Siberia 2 (38 fill up the demand gap. Across curtailed renewable electricity in
Bcm per year) and Central Asian various scenarios, it is evident the long term.
Figure 72: China gas demand scenarios from various institutions against operational and approved
production (2010 – 2050)
800
Rystad Energy
700 2.2-degrees
Forecast
600 Rystad Energy

1.9-degrees
500 IEEJ
Reference Case
400 Stated Policies
Historical supply-demand (2022)
gap was filled by LNG Rystad Energy
300
1.6-degrees
200 Announced Pledges

(2022)
100
0
2010 2015 2020 2025 2030 2035 2040 2045 2050
Abandoned Producing Under development LNG

3 / Natural gas and
low carbon gases
in the energy transition

3 / Natural gas and low carbon gases in the energy transition
This chapter builds on the scenarios presented in industry. Transportation is not evaluated despite
the previous chapter to lay out future pathways of its growing importance as a decarbonisation tool
decarbonising the consumption of natural gas because of the current limited size of the market.
and increasing the supply of low carbon gases. The criticality of natural gas supply decarbonisation
A high-level gas decarbonisation framework helps and the dramatic growth necessary in low carbon
to set the scene for analysing the possibilities and gas technologies goes hand in hand with
challenges within the 3 largest gas demand addressing the large variety of possible outlooks
segments: power generation, buildings, and of natural gas demand towards 2030 and beyond.
Highlights
• Energy conservation mechanisms have largely been overlooked as a powerful tool to reduce
emissions and reduce overall energy use. Demand response, time of use pricing and combined
heat and power generation are tools that would reduce the stress in the energy markets, improve
efficiency and ultimately reduce the total emissions from the energy system. Energy efficiency is an
important pillar in existing decarbonisation scenarios, and together with conservation measures, it
can deliver real value, including but not limited to reductions in natural gas demand. These measures
require targeted policy attention.
• Gas demand will likely remain resilient in power and industry at a global level, offering
unmatched flexibility as a dispatchable source in power generation, and process heat
applications for high-temperature industries. Battery energy storage systems (BESS) and gas
offer different value propositions as flexible energy sources but are complementary and should
not be viewed as mutually-exclusive alternatives – both will be necessary. BESS are energy-limited
resources and provide their highest value when used in short-duration rapid response grid and
renewables balancing dispatchment, while gas-fired power is an energy-unlimited resource (provided
the fuel is available) and its most valued quality is long-duration dispatchable reserve. Simply put,
gas generation enables sustained long-term stability of the power system, while batteries help to
ensure sustained power quality by smoothing sudden spikes. For heat intensive processes, there are
currently no cost-effective and scalable alternatives to natural gas for meeting high temperatures
required in the industrial sector.
• Renewable and low carbon gases show promising results in reducing the emissions of natural gas
supply in the power, industrial, and buildings sectors to meet heating, reactant and feedstock
needs, provided they are produced efficiently, sustainably, and cost-effectively, and are
accessible in sufficient quantities. With CCUS emerging as a competitive decarbonisation lever
coupled with significant developments in policies to encourage the roll out of capture facilities,
deindustralisation can be avoided by retrofitting existing facilities and infrastructure to be less
carbon intensive. Low carbon hydrogen can supplement or replace natural gas in certain sectors
and processes, although infrastructure integration challenges still exist. Biomethane, which is a
renewably produced natural gas, and e-methane, which is low carbon hydrogen transformed into
methane, offer a one-to-one direct substitute of natural gas, requiring no modifications to existing
natural gas-related infrastructure. Biomethane is already produced and used across the world, even
though its scale remains small relative to current natural gas usage. E-methane is a technology that is
actively pursued by several players in the industry. All the above low carbon gas technologies require
aggressive acceleration from the insufficient levels today to be in step with the transition needs.
• Methane emissions in existing natural gas operations must continue to be aggressively reduced for
gas to maximise its value as a transition fuel and remain as an efficient and sustainable product for
resolving the challenges posed by the energy trilemma. Methane is a powerful short-term greenhouse
gas, with the natural gas supply chain being the source of approximately 13% of anthropogenic methane
emissions. In total, the oil and gas sectors are responsible for roughly 25% of global methane emissions.
Mitigating methane emissions from the natural gas value chain provides the oil and gas industry with an
opportunity to stay relevant in an increasingly decarbonised world, and thus, reducing the likelihood of
stranded gas assets and increasing the quantities of sellable volumes of gas.

Gas decarbonisation
framework
Table 5: Gas decarbonisation framework
H2
H2
Fossil
This section explores the future demand in 2022. Gas is an The following four strategies
of gas in the energy transition important part of the power can be deployed to reduce
and its associated challenges and mix and offers great flexibility in environmental impact and
opportunities. It leverages the power generation. In the decarbonise natural gas in the
'Gas decarbonisation framework' industrial sector, gas is used as power, buildings, and industrial
(Table 5) to establish a baseline a reactant, feedstock and for sectors: capturing the low-
for the role of gas in the energy high-temperature heating. hanging fruit of reducing
transition, and to outline major consumption with pro-active
decarbonisation pathways for Many regions of the world conservation programs,
the three most important gas depend on piped gas distribution effective demand-response,
demand segments through four networks to run utilities and and efficiency improvements in
distinct strategies. Gas offers provide heat in homes, schools, and processes, insulation, or re-use
diverse opportunities and hospitals. Notably, even though it is of excess heat from processes;
attributes that contribute not included in the above table, electrification through
significantly to the global energy gas has been a growing input decarbonised electrons;
system, particularly in the into the transportation sector, gradually replacing natural gas
power, industrial, and building where LNG has been helping to with low carbon and green
(residential and commercial) displace oil and reduce emissions gases; continued use of natural
sectors which were responsible associated with long-haul transport gas with carbon capture
for around 85% of global gas and shipping. facilities.

Energy and gas demand

conservation considerations
Amid the energy transition and conservation measures, four of conservation and more efficient
shifting supply dynamics, energy which warrant closer review. energy use.
conservation has been largely
overlooked as a powerful tool for Demand response programmes: Time of use (TOU) pricing:
emissions reduction by reducing Demand response programmes Consumers are charged varying
overall energy use. It involves are classified as ‘reactive’ electricity rates based on the time
using energy more efficiently measures. These programmes aim of day, promoting energy
and thoughtfully through to reduce electricity consumption conservation during peak hours,
demand-side management, and during peak demand periods by and encouraging usage during
bolstering supply through encouraging and incentivising off-peak times. TOU provides
optimisation. These actions consumers to adjust their energy consumers with options to save by
improve resource availability, usage. This can be done through conserving and shifting energy
shore up energy security, and various strategies, such as shifting use to cheaper times of the day.
stabilise the energy landscape. non-essential activities off-peak Coupled with smart meters and
Measures fall into 'preventive' and hours or temporarily reducing the digitalisation technologies, TOU can
'reactive' categories, proactively operation of certain appliances or both reduce the strain on the
managing consumption and equipment (for instance, charging energy system and reduce the
responding during periods of electrical vehicles at periods energy cost for the consumers.
resource constraints or grid stress. with lower stress on the grid). Research by “Energy Saving Trust”
Industrial players can bid into suggest that the load during peak
Demand-side energy conservation demand response auctions where demand would be reduced by
measures are actions and they would be paid for the capacity, 5%-10% with implementation of
strategies taken to reduce energy they offer to reduce the demand to TOU. Ontario, Canada has been
consumption by the consumer or reduce the stress in periods of high one of the first jurisdictions in the
end-user. These measures focus demand. This alleviates strain on world to roll out smart meters and
on optimising energy use, the energy system, enhances grid implement robust conservation
increasing efficiency, and stability, and minimises the need and TOU programs, and it estimates
minimising waste. There are many for additional power generation, that conservation will have saved it
examples of demand-side energy ultimately contributing to energy over 30TWh of electricity.
Table 6: Energy conservation demand management measures
Demand measure Aim Impact on peak demand Impact on energy demand
• Energy efficient
appliances
Reduce the overall
• Cogeneration/ CHP energy demand
• Demand response
Decrease Decrease
• Demand response
Shift peak demand to
• Ecosystem off -peak hours (load
levelling)
integration
Decrease Unchanged

Combined heat and power needs. Cogeneration plants can In the EU, the Renewable
(CHP)/cogeneration: achieve impressive energy Energy Directive within the
Simultaneous production of efficiency levels of around 90%, Fit- for-55 package includes
electricity and useful heat during optimising resource utilisation provisions that support the use
gas-fired power production. The and minimising waste. These units of high-efficiency cogeneration.
goal is to enhance energy effi- are much more efficient than It acknowledges cogeneration’s
ciency, especially by repurposing conventional open and combined role in enhancing overall energy
waste heat from power genera- cycle turbines where the energy production efficiency, decreasing
tion and industrial processes for efficiency typically is in the range emissions, and aiding the
heating buildings, industrial of 40% – 60%, depending on the integration of renewable
applications, and even cooling age and quality of the turbine. energy sources.
Gas as a flexible and

dispatchable source of power
Figure 73: Power generation by primary energy source22
TWh
70,000
60,000
Historically, fossil fuels dominated baseload capacity Moving forward, role of gas shifts away from baseload
50,000
40,000
30,000
20,000
10,000
0
2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
Coal Liquids Natural Gas Biomass Nuclear Renewables
Historically, the power sector has likely to displace fossil fuels as necessary for maintaining grid
been dominated by fossil fuels, the dominant power generation stability and delivering reliable,
with coal and gas comprising source. This is exemplified by consistent, and uninterrupted,
around 40% and 22% of the Rystad Energy’s 1.9-degree power supply. The growth in
global power mix, respectively. scenario (Figure 73) in which the share of renewables in the
These sources mainly serve as share of coal declines to 4%, while generation mix is directly
baseload, intermediate and/or the share of renewables scales corelated with a growing need
peaking power to provide year- to around 77% by 2050. In turn, for flexible balancing capacity
round stability to global power natural gas shifts from being a that gas provides. As such, even
grids. Power generation baseload provider to becoming with high renewable capacity
accounted for 34% of total gas a flexible, dispatchable capacity additions, additional gas-fired
demand in 2022. As the energy resource to balance the electricity generation capacity must likely
transition progresses, in many grid in times of renewables be developed to maintain energy
parts of the world renewables are intermittency. This balancing is security in grids.
22
Rystad Energy’s 1.9-degree scenario has been used as an example.

Figure 74: CO2 savings from coal-to-gas switching in selected regions compared with 2010
Million tonnes CO2
2011 2012 2013 2014 2015 2016 2017 2018

0
-100
-200
-300
-400
-500
-600
United States China Europe India Rest of world
Source: IEA – The Role of Gas in Today’s Energy Transitions, 2019
Figure 75: Power generation by natural gas in varying degree-scenarios

TWh
9,000
8,000
7,000
6,000
Rystad Energy
5,000 2.2-degrees
4,000 Rystad Energy

1.9-degrees
3,000
Rystad Energy
2,000 1.6-degrees
Rystad Energy
1,000 1.5-degrees
0
2010 2015 2020 2025 2030 2035 2040 2045 2050
The role of gas as a flexible, access on the continent have of CO2 emissions by 2018. The
dispatchable source varies weak and unstable grids, with largest emissions reduction from
depending on the pace of energy frequent outages. These grids coal-to-gas switching has occurred
transition in different countries would require additional in the United States, where the
and regions. Emerging economies, reinforcement and flexible capacity rise of shale gas (and associated
such as those in Africa where to integrate large-scale renewables gas) reduced local natural gas
general energy poverty is still without risking a collapse (further prices, introduced abundant
high and Asia where coal plants details can be found in the IGU supply, and allowed large-scale
still dominate, consider gas as a “Gas for Africa Report”). switching from coal to gas in the
stable and sustainable alternative power sector. Between 2010 and
to energise economies and lower With reference to Figure 74, 2018, this resulted in emissions
the carbon intensity of the grid, positive effects of coal-to-gas declining by a fifth to 280 million
before moving towards increasing switching are already evident tonnes of CO2.
renewable energy adoption and in countries such as the United
leveraging the dispatchable States and China, where coal-to- Across Rystad Energy's degree
characteristics of gas. In Africa, gas switching has helped prevent scenarios (Figure 75), the
where electricity access is scarce, faster growth in emissions since significance of natural gas in
even the areas with the best 2010, avoiding 536 million tonnes the power sector remains

pronounced, even in high energy availability. In the long consider that natural gas-fired
renewable adoption scenarios run, the decline in gas-fired power plants can be decarbonised
such as the 1.6 and 1.5-degree generation reflects the pace with the use of new low carbon
scenarios. While all scenarios of adoption of renewables and gases and/or retrofitting with
project a decrease in natural gas- battery energy storage systems carbon capture technology. This
fired power generation by 2050, (BESS), which is the fastest under approach would allow gas-fired
the pace and extent of the decline the 1.5-degree scenario. However, plants to operate into the future
differs among scenarios. In the long-term gas-fired generation as low-emission sources of firm
1.6, 1.9 and 2.2-degree scenarios, remains necessary for dispatchable capacity, while also enabling
gas-fired power generation is energy and grid stability, due to the existing infrastructure to be
expected to increase in the short energy-limited nature of batteries, reused. Biomethane is a one for
to medium term, driven by the and geography-limited larger one renewable substitute for
increased pace of coal-to-gas capacity forms of storage, such as natural gas, while blending low
switching in emerging economies pumped hydro. carbon hydrogen and ammonia
in Asia. In regions such as Africa, for co-firing with natural gas is
gas becomes vital in addressing The above discussion does not another viable alternative.
Case study: Future role of

dispatchable sources in
renewable power grids
Figure 76: One-week comparison of South Australia’s power supply trend, energy in megawatts
broken down by resource in hourly increments (2023)
MW
6,000
5,000 Gas stepping in to provide grid load

demand on separate occasions where the
weather was rainy and cloudy
4,000
3,000
2,000
1,000
0
14 Aug 15 Aug
14-Aug 15-Aug 16 Aug 16-Aug 17 Aug 17-Aug 18 Aug 18-Aug 19 Aug 19-Aug 20 Aug 20-Aug 21 Aug 21-Aug
Gas Renewables Battery (Discharging) Imports Exports
Source: Open National Electricity Market; Rystad Energy
South Australia is renowned for to fulfil local demand. As of 31 add an additional 4,045 MW
having one of the world's high- October 2022, South Australia of storage capacity. Being
est renewable-penetrated grids, had 221 MW of existing battery completed in 2023 is the
with wind and solar accounting and virtual power plant (VPP) Torrens Island Grid Scale battery
for 70% of the capacity needed storage capacity with plans to energy storage system, which

has 250 MW capacity and is Figure 76 demonstrates dispatchable sources depends

currently the second largest how gas has effectively on regional renewable
operational battery in Australia. bolstered generation during characteristics, and installed
The state's grid frequently expe- adverse weather conditions in capacity. Regions lacking
riences situations in which wind South Australia. Between 20th sunny or windy conditions will
and solar generation reaches and 21st August 2023, experience longer, more severe,
and surpasses 100% of demand. renewable generation was and frequent periods where
The surplus energy is exported insufficient to meet daily dispatchable sources intervene
to Victoria via transmission grids consumption. To compensate as the grid-firming mechanism.
and stored in the Hornsdale for that, imports and gas Batteries will help offset
Power Reserve battery, resources were ramped up to some of the call on dispatchable
providing important short- meet demand. This displays the sources (e.g., gas), but battery
term backup to the power importance of dispatchability economics will deteriorate
grid. However, even in the in energy sources for grids to greatly if the system is
renewables-governed power operate, tapping on such dimensioned to fully
mix of Victoria, gas-fired power sources in times of high system accommodate all possible
plants have been consistently load and limited renewable weather scenarios, further
operational and essential in generation. However, the discussed in the following case
avoiding instability. share of power met by study.
Case study: The use cases

for BESS systems
Figure 77: Capital cost for selected battery storage projects
USD per kWh(real)
1,200
1,000
800 Moss Landing

(1.6 GWh)
$260/kWh
600
400
200 Cost needed for BESS to be competitive: 150 USD/kWh
2010 2015 2020
Thanks to their precision and services, as well as for “firming” to the power grid. They serve
rapid reaction time, battery non-hydro renewable energy as backup resources by storing
energy storage systems (BESS) integration and providing critical surplus energy during high-
are a superbly universal tool short-term ancillary services like generation periods and
for electric grid reliability regulation and voltage control discharging when renewable

output is low (or when demand battery project cost drivers such generation's LCOE. As such,
spikes), providing a more even as materials and equipment this highlights an important
power supply. The optimal expenses, potentially increasing financial consideration in
business case, or the sweet BESS project capital costs by energy system planning. As
spot, in which BESS value is 15% to 40%. In addition, BNEF the energy landscape
maximised is in the short reports rising battery costs of transitions towards more
duration reliability and firming 7% from 2021 to 2022. Thus, renewable sources, costs
operations, as both physical to match gas generation associated with scaling up
limitations of energy storage competitiveness, Rystad Energy energy storage can be
capacity and the economics of suggests that BESS capital costs significant due to the linear
less frequent discharges make it would need to approach $150 relationship between storage
less feasible for batteries to USD/kWh, assuming a $5 USD/ capacity and investment – with
deliver in longer duration MMBtu gas price and a $100 a higher storage need, the
balancing zones. USD/tonne CO2 carbon price. capital cost of the BESS system
would increase. In contrast, gas-
BESS capital costs have Figure 78 illustrates BESS as fired generation can provide
significantly decreased over advantageous over gas for dispatchable power without
the past decade, declining storage durations of up to four a one-to-one correlation with
from $1,000 USD/kWh in 2010 hours and with daily cycles. storage capacity. This highlights
to $260 USD/kWh for recent Yet, with expanding storage the advantage of gas (both
2022 projects (Figure 77). While duration, the marginal natural gas and other low
expectations of further price utilisation of the system falls carbon gases) from a cost
declines remain, these could be and results in an increasing perspective, accentuating the
countered by inflation of LCOS, which surpasses gas case for gas.
Figure 78: LCOS of batteries and LCOE of open-cycled gas turbine23
Balancing cost (USD/MWh)
500
450
le
400 e cyc
harg
the disc
st of s
350 it co
s t h e un conomic
late Se
300 S inf ges BES
BES n
n o f the ly challe
atio d great
250 utiliz an
ced
Redu
200
150 Battery storage system at Average 2022 global LCOE of gas:

USD 120/ kWh (capital cost) USD 95/ MWh
100
50
0
17% 15% 12% 10% 7% 5% 2%
Daily cycles Every second day cycle Every third day cycle
(e.g. 4h deficit , 365 times per year) (~180 cycles per year) (~120 cycles per year)
23
Assuming a four-hour battery system with 250 MW of capacity, 13 USD/MWh charging cost, capital costs
of 120 USD/kWh and 250 MW open-cycle gas turbine. The figure above assumes capital costs of BESS to
continue declining and illustrates a case example to show how low charging and battery capital costs needs
to be for it to be competitive. For reference the average European power price between 2018 and 2020
has been between 20 and 80 EURO/MWh, significantly lower than the 2030 forecasted charging cost in the
analysis above.

Capacity assurance mechanisms

demanded for energy stability
and reliable power grids
Capacity mechanisms, akin to cross-jurisdiction authority was In places like Africa, where
insurance for grid stability, are created to enforce reliability and electricity is scarce, capacity
designed to ensure adequate reserve capacity planning after reserve is today viewed as a
supply being available to meet the 2003 Northeastern grid luxury and power quality
maximum demand peaks (if across parts of Canada and the problems and outages are
demand and supply are not United States collapsed into a frequent. For these markets
perfectly balanced every hour prolonged blackout, due to a to have the ability to increase
of every day, the electricity combination of key monitoring renewables-driven electrification,
system can collapse into lengthy systems going offline, generators capacity planning and investments
blackouts). Capacity mechanisms not responding as anticipated, including natural gas generation
compensate electricity generators and an overloaded line short- will be pivotal for the energy
for being available to be called circuit, with insufficient reserve transition to succeed. Nigeria’s
on in reserve even if they are not generation. The newly created power grid, for example, has
always operating. This capacity North American Electric Reliability suffered over 200 partial or total
compensation is necessary to Corporation (NERC) implemented collapses in the last decade, and
secure investment in and strict rules imposing reserve there is a direct negative impact
maintenance of capacity beyond requirements to avoid similar from each of these events on the
what is needed for baseload and risks in the future. economy.
normal operations. The nature
of reserve capacity is that it is In Europe, capacity margins are Capacity mechanisms have been
operating less than baseload, its tightening. Many older generation established in many developed
operational revenue alone does facilities, especially aging coal economies to ensure that power
not provide for a commercial and nuclear plants are nearing systems are able to cope with the
business case when capacity is the end of their operational lives changing nature of generation
not priced by the market. The are being decommissioned due to and demand. Markets are
emergence of capacity markets environmental protection increasingly looking to new gas-
in some jurisdictions has been a policies. Additionally, these fired and nuclear plants, particularly
way to address that and ensure markets are witnessing a sharp as policymakers turn away from
sufficient reserve capacity. rise in the penetration of coal-fired plants in search of less
variable renewable power carbon-intensive generation. In
Capacity planning is also a long- sources. As the generation mix Europe for example, there are
term electricity system reliability evolves, system operators are two broad types of capacity
requirement to address the evaluating strategies to ensure mechanisms: ‘targeted’ and
long lead time from capital security and capacity margins. ‘market-wide’. ‘Targeted’
investments to energy supply Some systems may adopt mechanisms solely support the
availability when new demand storage systems and demand-side extra capacity required by the
emerges. As was discussed earlier responses, while others could rely market, while ‘market-wide’
in the energy trilemma section, a on flexible, dispatchable sources supports all participants (existing
high voltage power transmission such as gas fired capacity. and incumbents) as required to
line can take as long as a decade However, in many jurisdictions, meet reliability standards. Similar
to be built, and as such this sufficient new conventional activities and mechanisms are being
infrastructure should be planned power plants (especially gas-fired) rolled out in the United States.
ahead of anticipated demand are not being built. This is due Table 7 on page 71 shows the
growth to avoid shortages. to challenges such as low power different approaches to capacity
prices, utilisation, and the inability mechanisms used and proposed in
In North America, a robust to obtain financing. various countries in Europe.

Table 7: Capacity mechanism types and European examples
Type of capacity mechanism Description Where used or planned?
• A certain amount of capacity is held outside the market to be called upon in Sweden
Strategic reserve emergency situations Germany
• Volume based Finland
Targeted
• Support is granted to new investment projects to bring forward identified capacity

Tenders for new capacity required. May run in the market or be supported by a power purchase agreement France
• Volume based
Targeted capacity payments • Administrative payments are made to a subset of capacity in the market Spain
• Price based Portugal
• The total amount of required capacity is set centrally , and procured by a central Italy
buyer through a central bidding process in which potential capacity providers Greece
Central buyer
Market -wide
compete so that the market determines the price Ireland

• Volume based United Kingdom
Ireland
• An administrative payment is available to all market participants
Market -wide capacity payments Poland
• Price based
Belgium
Source: Rystad Energy; European Commission; Single Electricity Market Operator
Possibilities with renewable

and low carbon gases
This sub-chapter explores the in Figure 79. Presently, green global hydrogen subsidies have
pathways presented by low hydrogen is around three times been authorised via a tax credit
carbon and green gases. These more costly than blue hydrogen for hydrogen producers worth
include natural gas with CCUS, in the highlighted countries in the up to 3 USD per kilogramme.
low carbon hydrogen (including its figure. The main driver of the Even with the subsidy, green
carriers, blue and green high price of green hydrogen hydrogen is likely to remain the
ammonia), biomethane and production is usually electricity costliest option, while blue
e-methane, which can either fully cost, which could comprise more hydrogen may potentially be on
substitute natural gas directly or than 70% of cost for some par or become cheaper than grey
be blended with it to reduce locations. As such, access to hydrogen. Additionally, on August
emissions in various sectors. low-cost renewable electricity is a 30th, 2023, the European Com-
These gases offer a viable, primary way to make green mission introduced the European
direct replacement option (in hydrogen more competitive, in Hydrogen Bank auction, offering
many applications) as an addition to cost improvements on a fixed premium of 4.5 Euros per
alternative source to meet the capital costs of electrolysers. kilogramme of renewable
heating, reactant and feedstock Under Rystad Energy’s analysis, hydrogen. With the subsidy, the
needs, provided they are the cost of green hydrogen is LCOH (levelised cost of hydrogen)
accessible in sufficient quantities likely to become more compet- of green hydrogen in Germany
and are cost-effective. itive in the future, with prices approximately halves. However,
expected to drop down to, and in the cost of green hydrogen is still
Though cost remains a key some cases, below 2 USD/kgH2. a far cry from blue or grey
challenge for green hydrogen hydrogen. There is still a long
today (Figure 79 on page 72), Governments globally have trajectory required in the green
scaling and growth in deployment acknowledged the cost challenge hydrogen space for cost to be
are expected to bring significant of hydrogen and are acting. In the significantly reduced to meet its
cost reductions, as illustrated United States, one of the largest blue counterpart, and eventually

Figure 79: Levelised cost of hydrogen24 for Figure 80: Production cost forecast of green
selected countries (2023)25 hydrogen in the United States26
USD/ kgH2
9
8.4
8 7.6
7
6.0
6 5.6 EU
5.0 Hydrogen
5 Bank
auction
4
With IRA
3 2.5 2.6
subsidies
2.0 2.0 2.1
2 1.5 1.6
1.1 1.1
1 0.7
0
Saudi Arabia United States Germany Australia Japan
Grey H2 Blue H2 Green H2
as carbon prices rise and cater to 3.5% of global hydrogen natural gas demand in the blue
renewable competitiveness demand and is an order of magni- hydrogen domain. Given the
grows, grey hydrogen. tude short of the projected global substantial size of the pre-FID
demand for hydrogen in the pipeline and the gradual pace of
The costs presented in Figure 80 energy transition. For example, FID decisions, it is evident that
is the cost of delivering hydrogen the EU target alone is 20 million the progress of low carbon
to the local market. Additional tonnes by 2030. Considering hydrogen projects has been
costs would incur to export these today’s project pipeline, more relatively slow. This speaks to
volumes and profit margins de- than 800 kilo-tonnes of blue and the challenge of scale, where
manded by the developers would green hydrogen capacity has production and implementation
come in addition. The end-con- reached FID, these volumes of low carbon hydrogen needs
sumers of hydrogen are likely to will lift the total operational to rapidly grow to sufficiently
see higher commodity prices with production in 2030 to almost replace existing processes and
cost additions also related to the 4.5 million tonnes per year resources. In addition to the sup-
infrastructure export, import and (Figure 81 on page 73). Most low ply growth requirement, a sepa-
distribution infrastructure. carbon hydrogen projects are rate parallel scaling effort would be
located in China, Saudi Arabia, required to develop the infrastruc-
As of August 2023, there is and the United States of which ture to deliver it and technologies
3.2 million tonnes of operational approximately 96% involve green to adapt end use if hydrogen is to
low carbon hydrogen production hydrogen. The pre-FID project be used as direct fuel.
capacity globally, with the majority pipeline currently stands at
of that capacity coming via blue almost 44 million tonnes of blue There are several means of
hydrogen. In comparison to the and green hydrogen by 2030 transporting hydrogen via
91 million tonnes of hydrogen (Figure 82). One-third of the pipelines. Building new hydrogen
consumed in 2022, existing oper- pre-FID pipeline is blue hydrogen, pipelines is a method that has
ational clean hydrogen can only which signals a call for further already been adopted in North
24
Grey H2 uses natural gas as feedstock, while blue H2 is the same except that all CO2 emitted is captured. In contrast,
green H2 is generated via electrolysis of water.
25
Results and calculations are based on Rystad Energy assumptions extracted from the Rystad Energy Dynamix cost
dashboards, with the capacity factors used ranging from 12% to 30%, CCS costs (transport and storage) being 12 USD/
tonne of CO2, and feedstock costs used ranging from 30 USD/ MWh to 120 USD/MWh.
26
Cost reduction of green H2 is dependent on location of production (i.e., renewable conditions and relevant renewable
power source), size of plant and technology and cost development of electrolyser. Lower prices can be achieved in
favourable markets. The Henry Hub 2022 average natural gas price was approximately 22 USD per MWh, compared to
the green hydrogen price at 95 USD per MWh in 2023.

Figure 81: Clean hydrogen cumulative capacity Figure 82: Clean hydrogen cumulative capacity by
post-FID projects only (2010 – 2030) status, including pre-FID projects (2010 – 2030
Million tonnes of Blue /Green H2 Million tonnes of Blue /Green H2
5.0 50
4.5 45
4.0 40
3.5 35
3.0 30
2.5 25
2.0 20
1.5 15
1.0 10
0.5 5
0.0 0
2010 2015 2020 2025 2030 2010 2015 2020 2025 2030
Blue Green Operational FID/Under Construction Pre-FID
America (2,700 kilometres) and While the natural gas infrastructure hydrogen in natural gas is
Europe (1,700 kilometres). is valuable as an already existing estimated to reduce emissions
However, establishing new backbone for integration of the by around 7% while delivering a
pipelines can cost up to four new low carbon gaseous energy, fixed amount of energy output
times more than repurposing hydrogen transport would require for the end user. Figure 83 on
existing ones, according to existing natural gas infrastructure page 74 shows the relation
Rystad Energy’s research. to be repurposed. This is an area between the reduction in
Extensive research is ongoing for that requires continued work methane content and hence
pipeline retrofitting, particularly in from the industrial and emissions, and the increase in
areas with well-developed classification domains, as the total volume of the blended gas.
natural gas pipeline networks. business case and level of
Germany serves as a notable hydrogen in the gas distribution The technical challenges of higher
example, only requiring 30 network could call for retrofitting share of blending need to be
billion euros to repurpose its and improvements to be made addressed. Firstly, when injected
gas grid of more than 550,000 (coating, leak detection, etc.), into steel pipes, hydrogen can
kilometres that has been funded depending on the jurisdiction and accelerate pipeline steel
by around 300 billion euros in the state of infrastructure. degradation and cause
past. This is the result of a study embrittlement, necessitating the
on the steel pipelines in Blending of hydrogen with natural installation of coatings for
Germany’s gas grid, which gas is emerging as a middle-ground protection, albeit at an increased
concluded that the pipelines solution to scale hydrogen use refurbishment cost. Additionally,
are hydrogen ready. Several while waiting for the readiness of hydrogen transport through
companies are also looking to supply and purpose-built infrastruc- former natural gas pipelines may
repurpose their pipelines, with ture in the mid- and downstream require additional compressors,
Snam having already modified segments. Blending hydrogen with approximately three times the
its pipeline system – the largest natural gas is a potential means of compression power compared to
natural gas transmission decarbonising natural gas, while natural gas, owing to hydrogen's
network in Europe of 42,000 utilising existing infrastructure with- lower energy density.
kilometres of pipelines – and out large modifications. Current
has announced them to be 70% pilot projects suggest 20% blending To put things into perspective,
hydrogen-ready with no or to be achievable in most cases with- Rystad Energy conducted an
limited reductions on max out altering infrastructure. How- analysis of 2022 sustained gas
operating pressure (up to ever, as hydrogen has considerably demand towards 2030 in
99% with more substantial lower energy density than natural hydrogen equivalent terms
compression revisions). gas, a volumetric blend of 20% against the existing clean

hydrogen project pipeline, both

including and excluding pre-FID Figure 83: Volumetric methane content and corresponding volume
volumes, alongside the REPow- of blended substance
erEU target of 20 million tonnes
of renewable hydrogen by 2030 Volumetric percentage of methane in blend (%) Increased volume (%)
(Figure 84). Operational and FID
100%
clean hydrogen projects could
only fulfil 0.3% of 2022 natural 90%
gas demand in 2030, while the 93%
300%
REPowerEU target would fulfil 80%
1.7% of existing gas demand. Volume increase
70%
Even with the inclusion of pre-FID of blend
(Right axis)
volumes, a meagre 4.1%. To fully 60%
250%
replace natural gas by 2030, as 20% hydrogen blend results in a 16%
volumetric increase of the blend
projected in the 1.5-degree and 50% compared to pure methane to deliver
1.9-degree scenarios, the hydro- the same energy at the outlet .
Hydrogen have lower volumetric 200%
40%
gen projects would need to scale energy density than methane
up by 20 times and by more than 30% Reduce emissions
28 times respectively, similarly the / methane content
(Left axis)
capacity needed to meet 2022 20% 150%
demand would need to increase
10% 116%
by more than 20. This highlights
the significant challenge in scaling 0% 100%
low carbon hydrogen production 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
and while this analysis is a theoret- %vol hydrogen at 1 bar pressure and 15 °C
ical illustration to emphasise on

insufficient scale, hydrogen is una-
ble to replace gas on a one-to-one
basis in all regions and sectors. ability and cost-effectiveness and is their capability to substitute
Although hydrogen offers prom- put it on a par with natural gas. natural gas on a one-to-one basis,
ising decarbonisation routes for enabling the utilisation of existing
diverse sectors, substantial efforts Other low carbon gases such as infrastructure across the power
are required in terms of govern- biomethane and e-methane offer generation, industrial and building
ment policies and research and additional decarbonisation op- sectors. Biomethane is a mature
development to facilitate its scal- tions. Their main value proposition commercial technology, which
Figure 84: Cumulative blue and green hydrogen capacity (right axis) against natural gas demand
expressed in hydrogen equivalent (left axis)

Figure 85: CCUS capture projects pipeline Figure 86: CCUS capture projects pipeline against
(Operational, FID, pre-FID)27 expected CCUS capacity across various scenarios
Million tonnes per annum of CO 2 capacity (MTPA) Mtpa
600 7,000
500 6,000
5,000
400 5,966
4,000
300
3,000
200
2,000 3,402
100 1,000
0 0
2010 2015 2020 2025 2030 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Industry Power generation Direct air capture Others Industry Power generation Others
Direct air capture RE 1.5 DG RE 1.9 DG
has been in extensive use Carbon Capture, Utilization by 2030 (Figure 85). This is largely
across several markets, while and Storage, or CCUS is driven by the industrial sector,
e-methane is more nascent, another key decarbonisation which is expected to account for
and commercialisation is being tool and a crucial technology for 65% of CCUS capacity by 2030.
actively pursued. In response to achieving energy transition CCUS projects in the power
the energy crisis in 2022, goals across all scenarios. The sector is expected to increase
REPowerEU has already scale of adoption and technology from 1.6 MTPA in 2022 to 146.5
triggered incremental traction development must grow MTPA in 2030, driven by coal
and positioned European significantly from current levels as and gas-fired generation
biomethane production for CCUS is an essential component of projects, with 78.7 MTPA and
35 Bcm by 2030, from around the decarbonised natural gas (and 70.9 MTPA of capture capacity
4 Bcm in 2022. Globally, estimated energy) mix, that is embedded as being developed and planned,
biomethane production stood at key assumptions in the respectively.
around 7 Bcm in 2022, catering decarbonisation scenarios.
to around 0.2% of global gas Natural gas with CCS is a very The effects of government
demand that year, illustrating the attractive way of decarbonising support and commitment have
need to accelerate development consumption where there are been seen in the recent years
and grow scale aggressively. As few alternatives, such as cement, and encouraged developers to
for e-methane, developments steel, glass, hydrogen, refining accelerate their efforts in CCUS
are still in early stages, with and gas processing. developments. However,
industrial players such as according to Rystad Energy’s
Santos, Tokyo Gas, Osaka Gas, So far (September 2023), the analysis, CCUS will need to
Toho Gas, and Mitsubishi deployment of CCUS has had scale up by another 3,402
Corporation rolling out slow progress but projects are MTPA and 5,966 MTPA to be
demonstration projects to test quickly emerging. An important aligned with decarbonisation
the technology. If breakthroughs facilitator for the increased efforts in the 1.9-degree and
to reduce costs can be achieved, adoption of CCUS is policy 1.5-degree scenarios, respectively
e-methane could prove to be a support, either through (Figure 86). This calls for greater
major technology for decarbonis- investment incentives or tax private investments, regulatory
ing the natural gas supply. credits. Moving forward, total support, and partnerships across
Additional details on low carbon capture capacity (operational, industrial hubs to overcome
gases and state of supply are FID and pre-FID) will grow from challenges of cost, scale, and
discussed in Chapter 1. 40 MTPA in 2022 to 528 MTPA regulations.
27
Includes operational, FID, and announced projects.

Reutilising natural gas-fired

power generation infrastructure
for low carbon gases
One of the main consumers of which can handle hydrogen In January 2023, GE and IHI signed
natural gas is the power sector contents of more than 75%. a Memorandum of Understanding
and gas turbines currently play (MoU) to develop gas turbines
an important role in the global The need to upgrade existing that can operate on 100%
energy mix providing reliable turbines depends on the ammonia. IHI Corporation is a
electricity, without creating air hydrogen content in the targeted heavy industry manufacturer in
pollution and at about half of fuel. Low amounts of hydrogen Japan and is aiming to develop
the emissions of coal power blended with natural gas is ammonia combustion technologies
generation (Table 3). Gas-fired feasible for most applications in collaboration with GE to
power generation are cheaper to decarbonise the gas stream. decarbonise heavy duty gas
and faster to build than coal-fired Converting to higher and 100% turbines associated with its
generation. Natural gas has hydrogen content, however, operations. The two companies
been instrumental in lowering would potentially entail significant have committed to define a
electricity emissions by replacing changes including numerous technology roadmap to develop
coal and liquid-fired power plants components in the gas turbine gas turbine technology that can
(see Figure 86). system. In some cases, the eventually make two of GE’s
systems would have to be existing gas turbines able to run
Gas turbines also have a notable completely updated and upgrad- on 100% ammonia. In addition,
advantage in their ability to ed to allow for this. The viability of other large gas turbine players
operate on hydrogen. This converting existing gas turbines such as MAN are looking to
includes both new gas turbines must be evaluated based on develop gas turbines that can
and units already in operation specific turbine design. Further- operate on ammonia for heavy
which can be retrofitted to more, the use of gas turbines industries such as steel production.
operate on high H2 fuel content. operating on fuels containing hy- MAN has also expressed an interest
For many years, several large drogen is often seen at industrial in developing these further for
turbine manufacturers such as sites where hydrogen is available use by utilities. With these gas
Siemens and GE have operated as off-gases from other industrial turbines technologies reaching
gas turbines that can handle processes. Currently the long-haul commerciality, retrofitting gas
varying hydrogen content. In the transportation of hydrogen either turbine to run on ammonia is
cases of burning a hydrogen and as a liquid or through a carrier is expected to be a viable way of
natural gas blend, the most used far from commercial and these decarbonising gas-fired power
turbine technologies are the later power generation methods are production. However, the
generations of the Dry Low dependent on locally supplied or commerciality of these technologies
Emission (DLE) burner design, piped imports of hydrogen. is not expected before 2030.
Critical role of gas in heavy industries

Gas has historically held an feedstock to produce hydrogen with rising population and
important position within the for the refining and chemical economic development, as
industrial sector, comprising industries. Secondly, gas serves demand for food and consumer
around 27% of global gas as a feedstock for ammonia and goods increases. Lastly, gas is
consumption in 2022. Gas serves methanol production, crucial for typically used in heat processes
as a reactant, feedstock, and vital fertiliser and other industrial value and is even suitable for processes
source of process heat within chains. These products are requiring temperatures of more
industries. Firstly, gas is the key expected to be of high demand than 1,000 degrees Celsius due

Figure 87: Process temperature by industrial sector
Food and beverage 30 200 Processes that will still require gas in the medium to long term
Agriculture , forestry and fishing 50 250
Water and sewerage 150 250
Textile 150 600
Chemicals 250 900
Non-ferrous metals 150 1,200
Bricks and ceramics 250 1,200
Cement, lime 150 1,400
Glass 250 1,500
Iron and steel 800 1,500
-100 100 300 500

500 Approximate
700 Process Temperature
900 °C1100 1300 1500
Source: Australian Renewable Energy Agency; Rystad Energy
to its high energy density and improve air quality and the local equipment, gas will continue to
controllable combustion character- environment and significantly cut be necessary.
istics, as seen in Figure 87. In the emissions.
coming decade, industrial processes Installing CCUS units at industrial
demanding high temperatures For industrial processes that are sites is another option to decar-
would likely remain gas-driven, less heat intensive (up to 500 de- bonise hard-to-abate industrial
particularly within the metals, glass, grees Celsius) such as food drying processes in cement production
ammonia, and ceramics sectors. and beverage processes, electri- and steel manufacturing. For
While these sectors also have lower fied heating is a viable decarbon- example, the Longship project
heating requirements that could isation option that would likely captures 800,000 tonnes of CO2
be tackled by electrification, the reduce the demand for natural annually from Heidelberg Materi-
largest share of gas consumption gas. For processes with higher al's cement factory and Hafslund
is directed at the highest tempera- heat requirements (up to 1,000 Oslo Celsio's waste incineration
ture parts of the processes. degrees Celsius), electric furnaces facility, to be stored in geological
could be used, but technologies formations beneath the North
Moving forward, natural gas will like these are still in development. Sea. Although the number of
continue to play an important role For example, BASF is developing CCUS projects is growing globally,
in the industrial sector, though electric petrochemical cracking challenges such as limited access
low carbon alternatives – electrifi- furnaces that can reach 850 de- to funding and a lack of support-
cation of processes, green gases, grees Celsius, planned for full scale ive policies are recognised as the
and using CCUS units – are operations by 2030. However, main barriers hindering large-scale
available to decarbonise some electrified equipment would fare CCS developments. In terms of
industrial processes, if they can be worse than gas when it comes CCUS policies, though a positive
produced at sufficient scale and to heat-intensive processes that shift has been witnessed in 2023
competitive costs. It is important require reliable heat generation for through policies like the United
to note that coal is currently an extended period of time. Elec- States' IRA, EU's Net Zero Industry
the main industrial fuel source, trifying the heavy industrial load Act, and Japan's long-term CCS
particularly in Asia, accounting for would also place significant strain roadmaps, governments would
37.7% of global total industrial on the electrical grid. Additionally, need to assist developers in
energy use in 2022 and producing gas-fired heat processes are more creating a favourable financing
very high greenhouse gas cost competitive than electrified and regulatory environment for
emissions (nearly 40% of total processes due to the availability of CCS developments to proceed.
energy-related greenhouse gas natural gas and mature technolo-
emissions) and air pollution. gies. As such, unless technological The usage of low carbon gases will
This leaves a lot of room for advances reach maturity and costs be an essential part of the effort
fuel switching to natural gas to become comparable to conventional to reduce the emissions from the

Figure 88: Industrial gas consumption in varying degree-scenarios
Bcm
1,800
1,600
1,400 Rystad Energy

2.2-degrees
1,200 Rystad Energy

1.9-degrees
1,000
800
Rystad Energy
600 1.6-degrees
400
Rystad Energy
1.5-degrees
200
0
2010 2015 2020 2025 2030 2035 2040 2045 2050
industrial sector. Decarbonisation From the above assessment, it is varying degree-scenarios (Figure
enabled by low carbon hydrogen clear that gas will continue to play 88). The role of gas remains
and ammonia is particularly appli- an important role in the energy significant, even in the 1.5 and
cable to processes that currently transition, and this brings back the 1.6-degree scenarios, due to
use grey hydrogen or ammonia question of planning for sufficient limited alternatives. In the
as feedstock, and processes that supply to be available for both higher degree scenarios, the
rely on fossil fuels to reach high natural gas and the incoming low industrial sector increases gas
temperatures (> 1,000 degrees carbon gases. This takes into consumption, due to an uptick in
Celsius). Biomethane offers a account the demand augmenta- industrial activity and because
one-to-one direct substitution tion from adoption of alternative gas is used to replace other
of natural gas, requiring no need technologies in the industrial fossil fuels, followed by a
for infrastructure modification. sectors where it is possible and gradual decline post-2035.
Although low carbon gases show affordable to accomplish. However, the decline is slowed
promise in various applications, by new CCUS facilities and the
challenges related to scalability Rystad Energy show the pathways retrofitting of existing facilities
and cost remain. of industrial gas demand through with CCUS.
Transition of the building sector

The buildings sector (residential vation. Towards 2050, natural gas heat, enhancing insulation, and
and commercial) consumed displacement can be expected using efficient demand response
approximately 21% of natural gas across different regions, based on measures. Numerous policies
in 2022, amounting to around the adoption of low carbon gases across Europe (REPowerEU) and
991 Bcm. Natural gas is commonly and electrification. North America (IRA) have under-
used as a fuel for heating, scored energy efficiency as a key
cooking, and providing power for A highly scalable approach to measure for reducing emissions
appliances and utilities in the decarbonising buildings involves and eventually attaining net-
buildings sector. Towards 2030 leveraging energy efficiency and zero emission goals. In Asia, Japan
and beyond, gas will continue conservation measures. Energy immediately comes to mind,
to play an important role in this efficiency stands as a readily having one of the lowest energy
sector, with the largest decarbon- accessible method for curtailing intensities in the world. This was
isation efforts likely coming from energy usage by retrofitting achieved via policies such as the
increased efficiency and conser- appliances, repurposing surplus “Rational Use of Energy Act” that

that came into place in 1979 to

promote periodic reporting on Figure 89: Emissions from residential gas versus power sector by
energy consumption and country28
reduction efforts, and to
encourage competition among Kg CO2 per MWh
companies in energy efficiency. 800
Its most recent policy – “New
Strategic Energy Plan” – aims to 700
take energy efficiency improve-
ments further, setting a 40% 600
energy efficiency improvement
target from 2013 to 2030. In 500
fact, the IEA has highlighted that
400
comprehensive energy efficiency
renovations are key for decar- 300
bonisation, potentially improving
energy intensity per square metre 200
by more than 50%.
100
Another buildings decarbonisation
pathway involves the 0
integration of low carbon
90
95
00
05
10
15
20
25
30
35
40
45
50
19
19
20
20
20
20
20
20
20
20
20
20
20
gases, such as hydrogen and
China - Power Japan - Power UK - Power
biomethane, into the gas US - Power Residential gas boiler
supply. This can either be done
through partial blending or full Source: Rystad Energy
substitution. Partial blending is a
transitionary alternative towards emissions, electrifying buildings they consume. Governments
lower emissions from the would have the opposite effect. It across Europe, North America,
buildings segment without doing is important to highlight that and Asia have been providing
large overhauls of residential electrification of buildings will grants to incentivise the
infrastructure, and with create significant additional installation of heat pumps. For
biomethane full substitution does demand for electricity, requiring example, the United Kingdom
not require any retrofitting. Low additional low carbon power government has set out plans to
carbon gases can significantly generation, transmission, and offer 5,000 Pounds grant to help
reduce the carbon intensity of distribution development. A study 90,000 households install heat
energy consumption in buildings, conducted by “The Center on pumps between 2022 and 2024).
while leveraging existing gas Global Energy Policy” see Japan subsidises heat pumps as
infrastructure. However, there electricity demand to potentially an energy saving project in
are several barriers pertaining to grow from 3.9 PWh to more than residential, industrial, and com-
cost and scale which need to be 15 PWh in the United States with mercial sectors. It is important to
overcome before wider scale and large scale electrification. note that decarbonisation through
adoption can occur. electrified appliances depends
Electric heat pumps are a popular on the grid’s carbon footprint. To
Electrification has been one of solution for the electrification of achieve low or net-zero emissions,
the main decarbonisation heating as they enable efficient the power grid must be improved
pathways in many net-zero transfer of heat from the to provide cleaner electricity for
strategies in recent years. Some environment (air, ground, or these appliances.
countries already have low water) into buildings with the
power grid emissions, and help of a refrigerant fluid. Its Additionally, despite policy
electrification in these cases will efficiency can reach more than shifts favouring electrification,
result in reduced emissions, while 300%, meaning heat pumps can significant switching costs remain
in the cases where electricity generate three to four times the a challenge. This is exemplified
emissions is higher than buildings heat compared to the electricity through the delayed gas boiler
28
Power mix according to 2-degree scenario, assumed 90% efficiency for residential gas boilers, power mix carbon
intensity with the IPCC references from chapter 1 and Rystad Energy’s view on future power mix distribution. The
power results show the emissions per MWh if electricity is utilised for heating.

ban in Germany from 2024 In conclusion, while electrification important pathway, it is not the
to 2028 due to public outcry will make sense in certain parts only route to decarbonisation,
against high switching costs to of the building segment, similarly and the policy focus should fall
heat pumps. For comparison, the to industry, it will not work cost on finding solutions that provide
upfront cost of a gas boiler in Ger- and environmentally efficiently the highest emissions reduction
many is between 1,000 Euros and everywhere. The economics of return on investment. To
3,000 Euros, while the installation switching will play an important decarbonise the buildings sector,
of a heat pump system costs role, and in many cases, gas will governments should first
upwards of 10,000 Euros, after remain a viable option and prioritise energy conservation
subsidies and grants. Moreover, continue to play an important in and efficiency measures to
given the historical cost effective- the building sector, particularly manage consumption. This can
ness of residential gas compared with the direct decarbonisation bridge the longer-term pathways
to electricity, this further enhanc- options via low carbon gases. of transitioning towards low
es the case for gas boilers. While electrification is an carbon gases and electrification.
Methane emission
reduction initiatives
Mitigating methane emissions not at the expense of a continued is poised to play a key role in this
plays a major part in meeting the step-up in CO2 mitigation – respect, but emission reduction
Paris greenhouse gas (GHG) which has more significant is crucial for natural gas and LNG
reduction goals. Methane is the compounding effect on long-term to remain relevant as an energy
second largest GHG after carbon global warming. Even amid an source in the long term.
dioxide (CO2). Its warming effect expected ramp-up of renewable
is however significantly stronger energy supply, the recurring Many initiatives have been
in the short-term, which makes it prospect of intermittency causing launched to abate methane
a more potent near-term climate shortfalls of solar PV and wind emissions from the natural gas
forcer than CO2. Therefore, power creates a need for value chain, the most prominent
methane emissions mitigation is complementary energy sources of which is the Global Methane
an urgent matter, as long as it is to always be available. Natural gas Pledge (GMP), launched at the
Table 8: Prominent industry initiatives in reducing methane emissions
Source: Global Methane Pledge; Oil and Gas Climate Initiative;

Oil and Gas Methane Partnership 2.0; Methane Guiding Principles; Jera; Kogas

COP26 summit in November There are also several other active and the governments of Japan,
2021. It is led by the United industry initiatives tackling South Korea, Australia, and the
States and the EU and has been methane emissions, namely the United States, and was launched
joined by more than 100 Oil & Gas Methane Partnership recently to facilitate the
countries, representing about 2.0 (OGMP 2.0) - referred to as monitoring and abatement of
50% of global emissions, and the gold standard of methane methane throughout the LNG
more than two-thirds of the emissions reporting within the oil value chain. The initiative brings
global GDP. The aim of the and gas industry, the Oil and together LNG buyers and
initiative is to reduce global Gas Climate initiative, Methane producers to collectively mitigate
anthropogenic methane emissions Guiding Principles, and the methane emissions in LNG to
across all sectors by at least 30% Coalition for LNG Emission boost its allure as a transition fuel.
by 2030, compared to 2020 Abatement toward Net-zero
levels. Furthermore, the IGU (CLEAN). Table 8 shows a Methane emissions can occur
has been a prominent proponent summary of the most prominent through the entire natural gas and
of ongoing efforts to measure, industry initiatives in place to LNG value chain, and LNG but are
record, and minimise methane reduce methane emissions across most prevalent during gas
emissions among its members and the oil and gas industry. production and shipping. In
beyond, a commitment general, there are three ways
that dates to at least 2016 when For the LNG sector specifically, methane gets emitted in the
the IGU Group of Experts on CLEAN is a private-public initiative natural gas value chain: through
Methane Emissions was initially among Japan’s Jera, South Korea’s fugitive emissions, flaring, and
established. Kogas, the European Commission, venting of methane.

4 / LNG as a Critical Conduit
for an Orderly Energy
Transition
4 / LNG as a Critical Conduit for an Orderly Energy Transition
Liquefied natural gas (LNG) technology has and distribution within the energy transition,
introduced an unmatched scalability and flexibility and the potential future role of natural gas
to natural gas as an energy source. This chapter infrastructure as an enabler and carrier of low
explores the role of LNG in providing flexible and carbon gases. This is an important part of making
resilient energy supply. It also investigates the investments in natural gas related infrastructure
pathways for the decarbonisation of its production future proof.
Highlights
• Conversion of natural gas to LNG introduces unmatched scalability and flexibility, often
replacing high-emitting sources like coal and fuel oil. The dynamic distribution of LNG allows for
the creation of “virtual pipelines” that can enable access to energy for developing regions and remote
areas where piped gas is not a viable option. In 2022, LNG trade connected “exporting markets” to
markets with importing capabilities, expanding access to areas where pipelines could not reach. The
flexibility of LNG has been affirmed on numerous occasions in recent years, most recently during the
war in Ukraine with increased imports to Europe, but also after the Fukushima nuclear disaster in
Japan in 2011, and the experience of Europe last year has demonstrated the remarkable speed with
which access to LNG can be enabled, using FSRU technology. In less than a year, Germany was able to
begin import of LNG for the first time to offset its losses of Russian pipeline gas imports.
• Floating regasification units have been essential for Europe to quickly replace piped gas
imports following the outset of the Russia-Ukraine war, with the region seeing an increase in
regasification capacity of around 60% from year end 2022 to August 2023. This displays the
flexibility that floating liquefaction and regasification facilities introduce within the LNG value
chain. Floating facilities typically have lower capital cost and shorter lead time and can be moved
and reused in new locations if needed. Furthermore, the location of the facility is not constrained
by typical onshore infrastructure challenges and regulations.
• Small-scale LNG (ssLNG) is uniquely positioned to provide reliable and cost-efficient energy in
areas such as small, remote settlements or islands, and in developing regions. Often, the
alternatives are high emission energy sources like coal, diesel, and traditional biomass. For instance,
Sub-Saharan Africa relies heavily on oil to support its decentralised power generation, with distributed
diesel capacity alone estimated to somewhere between 45GW and 100GW29. Moreover, ssLNG is an
attractive fuel option, especially viable in shipping and long-haul heavy-duty road transport, offering
a competitive and more environmentally friendly alternative to oil and diesel. LNG emits zero
sulphur oxides (SOx) and particulate matter (PM) and 90% less nitrogen oxides (NOx) compared to
combustion of heavy fuel oil30.
• Bio-methane and e-methane have the same composition as natural gas, meaning that they can
utilise existing LNG infrastructure without adjustments, which could make them attractive and
competitive options for decarbonisation. Further, the potential of utilising existing LNG infrastructure
for liquid hydrogen carriers like liquid hydrogen and ammonia is gaining traction in several parts of the
world, leading to increased investments and R&D efforts.
• New infrastructure investments should be developed with the compatibility of low carbon and
renewable gases in mind. This is an important part of future proofing investments in gas and LNG
infrastructure to keep the energy source relevant and financially viable at current levels, and to
reduce the risk of becoming stranded with the inevitable development towards low carbon gases.
As with the rest of the supply chain, it is pivotal to build on the aggressive elimination of methane
emissions to preserve the environmental value of gas for the energy transition and beyond.
29
30
Sea-LNG “LNG as a maritime fuel – The investment opportunity”

The role of LNG in

future energy systems
As discussed in the previous world where electrification may ting sources like coal and diesel.
sections, the required massive not be the right solution to The flexibility of LNG has been
surge in the share of renewable decarbonise, either due to displayed on numerous occasions
energy through the energy technical limitations, or due to - particularly during the war in
transition, will intensify the need cost. In these instances, the Ukraine, when the United States
for responsive dispatchable availability of affordable, reliable, increased its exports to Europe by
balancing sources of energy to and efficient low carbon gaseous 159% from 2021 to 2022, shift-
ensure that energy demand is energy will be critical to maintain ing traditional LNG trade flow
continuously met. While batteries stable and sufficient energy supply. patterns from Asia to Europe, as
are expected to fulfil most of the previously discussed in Chapter 1.
balancing needs for shorter In addition to the dispatchable The 2011 Fukushima
periods of peak and intermittency characteristics of natural gas, its nuclear disaster in Japan was
events, natural gas and low conversion to LNG introduces another demonstration of the
carbon gases will play an essential unmatched scalability and criticality and flexibility that
role as a reliable and cost-efficient flexibility. The dynamic LNG offers. Japan’s gas imports
energy source to secure reliable distribution modes of LNG, that surged from 91 Bcm in 2010 to
supply during longer gap periods. include primarily shipping, but 118 Bcm in 2012, as LNG arrived at
This assumption is included in all also increasingly truck in the rescue, offsetting the sudden
demand scenarios evaluated in smaller-scale, function as "virtual loss of key power-generation
this report, signifying the crucial pipelines", supplying developing resource when the Fukushima
role natural gas and low carbon regions and remote areas where Daiichi nuclear plant was
gases plays in future electricity piped gas is not a viable option. destroyed. This in turn made
systems. In addition to power This often reduces emissions Japan the largest LNG importer
supply, there will remain areas of and improves air quality due to in the world by a significant
the economies and regions of the the replacement of high-emit- margin.
Small-scale LNG for

increased energy accessibility
The flexibility of LNG stems largely infrastructure, small-scale LNG emissions, and a high-cost energy
from its scalability. LNG can be (ssLNG) is uniquely positioned resource. Furthermore, increased
provided from large liquefaction to provide reliable and cost- demand for long-duration
and regasification facilities effective energy. Often, the balancing in the future electricity
feeding into the pipeline network alternatives are higher-emission systems calls for dispatchable
of large cities and regions, or it energy sources like diesel gensets, energy sources, such as gas.
can come from small-scale and traditional biomass. For However, consumption is likely to
terminals providing energy to instance, Sub-Saharan Africa be smaller in absolute quantities,
remote settlements, trucks, or relies heavily on oil to support its more volatile and more widely
ships. In areas such as small, decentralised power generation, distributed compared to current
remote settlements or islands, with distributed diesel capacity norms, given the uptick of
with limited gas demand and alone estimated to be anywhere renewables, micro-grids, and off-
challenging conditions for large- between 45GW and 100GW31. grid solutions, further exemplifying
scale distribution and traditional Diesel is highly polluting with high the relevance of ssLNG.
31

Furthermore, ssLNG typically pollution large cities, as natural its domestic production of natural
requires lower investments and gas does not emit soot, dust, or gas, driven by the government’s
shorter lead times than traditional PM during combustion. For the promotion of gas to replace more
LNG, thus boosting its popularity in heavy-duty truck segment, LNG is emission intensive energy sources,
developing regions where satellite expected to remain the most and to improve energy accessibility
terminals can be set up. As more effective fuel in terms of in the country. The growth in the
marginal gas resources become emissions in the medium term, domestic market has notably
available and smaller demand given the challenges facing been enabled through small-scale
centres emerge, ssLNG becomes alternative solutions. Electrification applications. This has further
crucial in increasing LNG of the truck fleet is a complex boosted the private sector
production and usage going option hindered by strict battery investments in ssLNG, which aims
forward. For example, the Port requirements pertaining to to take advantage of the cleaner
Edward LNG project in Canada is durability and performance, and cheaper alternative to diesel.
planned take two years to whereas synthetic fuels are not For instance, in 2016, private
construct and cost 300 million financially feasible at present. player Greenville LNG
CAD, and when compared to commissioned a 450 million USD
larger LNG facilities like LNG In marine transport, dramatic mini-LNG and gas processing
Canada that is only about 85% changes in regulations – the facility in Rumuji, Rivers State,
completed after 5 years of International Maritime including three liquefaction
construction and costs 100 times Organisation’s fuel oil Sulphur trains, boasting a combined LNG
more in capital cost, the limit was tightened from 3.5% to production capacity of 2,250
advantages of ssLNG are clear. 0.5% in 2020 – have allowed LNG tonnes per day. From this facility,
The Port Edward LNG plant aims to gain traction as a fuel, LNG is distributed throughout
to supply LNG for export and for particularly due to the considerably Nigeria using LNG-powered trucks
domestic customers in remote lower emissions of SOx and NOx. equipped with cryogenic tanks,
communities looking to switch to In 2022, global LNG bunkering each with a carrying capacity of
cleaner fuels such as those in activity decreased as oil-based 23 tonnes of LNG. Notably,
forestry camps and mining fuels traded at significant Nigeria has managed to monetise
facilities, which would otherwise discounts to global LNG prices. the associated gas from its oil
not be served by larger LNG However, as of early 2023, LNG production, becoming the key
facilities like LNG Canada. prices have once again become exporter of LNG on the continent.
Moreover, ssLNG is an attractive competitive with fuel oil, further Other well-established gas
fuel option, both on land and at encouraging a rapidly expanding companies, including Axxela and
sea. LNG offers a competitive and LNG-fuelled orderbook and Greenfuels, are now focusing on
more environmentally friendly ensuring continuity with the mini-LNG facilities to diversify
alternative to oil and diesel, acceleration of decarbonisation their offering. Axxela has signed a
reducing emissions and most measures. Indeed, more than 50% contract for engineering,
importantly eliminating harmful of today’s orders for alternative procurement, and construction
air pollution. During combustion, fuelled ships are LNG-ready. It is of a mini-LNG plant in Ajaokuta,
LNG emits zero sulphur oxides currently the only technologically aimed to supply the northern
(SOx) and particulate matter (PM) mature alternative to oil-based states with gas through
and 90% less nitrogen oxides marine fuels: other carbon truck-based distribution. The
(NOx) compared to heavy fuel neutral fuels, such as hydrogen, development of ssLNG in
oil32. It is particularly viable in green ammonia, or methanol, Nigeria has effectively
shipping and heavy road are still facing technological, democratised gas by increasing
transport. In China, LNG-fuelled infrastructural, economic, and the availability of energy to
heavy-duty trucks and buses have regulatory issues, and are not the public, in turn facilitating
seen massive growth over the expected to become widely economic growth. This strategy
past decade. This development available in the very near future. could in turn be mirrored in
has largely been driven by neighbouring countries to bolster
government policies and Nigeria, Africa's largest exporter of industrial activity and economic
regulations to address local air LNG, has recently been increasing growth.
32
Sea-LNG “LNG as a maritime fuel – The investment opportunity”

Flexible LNG to
balance out troughs
Figure 90: Installed FLNG capacity per region
Million tonnes LNG
50 48
5
45
3
40 13
Middle
35 Asia East
30
14
25
North
20 America
15
12
10 Africa
5
0
2022 2030
Africa North America Asia Australia Middle East
The success of the traditional comparatively low capital cost installations in 2022. The new
LNG value chain is dependent on and short lead time can enable projects added in the region last
economies of scale, driven by profitable operations even on year include Coral South FLNG in
considerable investment marginal fields with modest Mozambique and the Cameroon
requirements in infrastructure. production capacity, partly due to FLNG project. Mozambique has
The introduction of floating no export pipelines being needed. struggled to develop its LNG
facilities such as floating LNG Furthermore, the cost of FLNG has capacity due to safety issues
(FLNG), floating storage and fallen in recent years, partly driven related to the civil unrest that
regasification units (FSRU), by the standardisation of newer started in the northern parts
floating regasification units FLNG vessels. Rather than being of the country in 2017. FLNG
(FRU),and floating storage units customised for usage in a specific facilities can reduce risk while
(FSU) has unlocked a new degree field, these vessels are designed still offering economically
of flexibility within the LNG and to have greater flexibility in competitive ways to monetise
broader energy value chain, as the deployment with reduced lead otherwise stranded gas resourc-
location of the facility is not time, offering significant cost es. FLNGs can also serve as an
constrained by typical onshore savings. In addition, FLNGs offer intermediate solution for larger
infrastructure challenges and various advantages over onshore fields, providing early cash flow
regulations. Furthermore, floating projects, which often face until onshore liquefaction trains
facilities can be redeployed to land constraints and complex come online.
new locations if needed. environmental approval processes.
North America is expected to take
FLNG offers the possibility to The West African region is home the lead in terms of new installed
cost-effectively commercialise to many marginal gas fields with FLNG capacity in the coming years,
small or stranded gas reserves, stranded reserves and limited driven by development in the
especially in areas where there existing infrastructure. This is United States. FLNG is a part of
are limited or no existing reflected in Africa’s market share the country’s strategy to quickly
infrastructure. The technology’s of 46% of global FLNG capacity access gas resources for overseas

export, supplementing the rising carriers are retrofitted, flexibility only months after project
supplies from onshore LNG in use, and lower risk as FSRUs approval due to the geopolitical
facilities. The first upcoming can be leased. Historically, South risks and gas supply shortages
project in the United States, America, the Middle East, and Asia that emerged after the start
fittingly named Fast LNG, is have been the largest markets of the Russia-Ukraine crisis in
expected to come online in 2025 for FSRUs measured in installed February 2022. The Eemshaven
with a liquefaction capacity of 2.8 capacity. South America tops project consists of two vessels –
MTPA. The Altamira FLNG project the ranking year-to-date with 46 one built as an FSRU in 2017 and
in Mexico is another example of million tonnes of regasification the other built as an LNG tanker
responsive new supply, initiated in capacity, corresponding to 30% in 2014 before being converted
June 2022 and expected online by of the global market. Asia and in 2022. This is the first FSRU
the end of 2023, introducing 2.8 the Middle East each had around project in the Netherlands and it
MTPA of LNG to the market. 22% of the market, at 33 million underscores the unique flexibility
tonnes and 32 million tonnes of the concept can offer.
FSRUs are relatively new capacity, respectively. Europe
compared to their onshore has increased its capacity by The other 16 approved European
counterparts, with the first unit around 60% from year end 2022 projects in 2022 are expected to
being deployed in the United to year-to-date 2023 and is the come online between 2023 and
States in 2005. Since then, the fourth largest region with 30 2025 – four are already operational
number of FSRUs has surged, million tonnes of capacity and a while three are under construction.
representing around 15% of market share of 20%. This represents lead times of
global regasification capacity as one to two years, further
of August 2023. This is expected At that trajectory, Europe is underpinning the flexibility and
to increase by the end of 2023 expected to surpass both South scalability FSRUs bring to the
with new FSRUs expected to enter America and the Middle East by global gas market.
the market, especially in Europe. 2024 in installed regasification
FSRUs played a key role in capacity. During 2022, 17 new FSRU infrastructure has been
Europe’s response to the FSRU projects were approved in invaluable in restoring Europe’s
energy crisis escalated by the Europe, amounting to about energy security, as it opens for
Russia-Ukraine war and the loss 65 million tonnes of capacity new gateways to receive
of Russian gas volumes. The if realised. In particular, LNG and addresses existing
advantages of FSRUs are like Netherland's Eemshaven FRSU inter-regional infrastructure
those of FLNG vessels: lower project started operations in bottlenecks to facilitate easier
capital costs, shorter lead record time. It commenced movement of gas to consumers.
times especially if existing LNG operations in September 2022, However, it is important to be
Figure 91: Installed FSRU capacity per region Figure 92: European installed FSRU capacity life cycle
Million tonnes LNG Million tonnes LNG
450 120
400
100
350
300 80
250
60
200
150 40
100
20
50
0 0
2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Asia South America Europe Middle East Operational Under Construction Pre-FID
Africa North America Australia Russia

mindful that while lead times for in the utilisation of existing LNG many of the regasification
LNG receiving infrastructure can facilities comes into play. facilities in Europe ran at above
be less than two years, the Liquefaction plants in the United 100% capacity. This firstly
production of new volumes to States posted a utilisation rate of emphases the responsiveness
deliver the supply is typically 103% in 2021 due to tightness in and scalability of LNG
longer. Furthermore, the the gas market. In 2022, plants in infrastructure, with a critical
development of LNG export and Qatar, the United States and the role in safeguarding energy
import facilities are investments UAE all produced at more than security, and secondly, it
that require long-term planning 100% utilisation, exporting LNG highlights the urgency for
for the energy system and is above their nameplate capacities rebalancing the market with
hence not as responsive in the im- due to shortages caused by the additional supply and sufficient
mediate term. Here, the flexibility Russia-Ukraine crisis. Similarly, infrastructure.
Repurposing existing LNG

infrastructure for clean and
low carbon alternatives
There are several ways of gases. This could either be partial infrastructure used for natural
decarbonising and future-proofing decarbonisation with natural gas gas and LNG. Both methods are
the LNG value chain, as LNG blended with low carbon gases supported by the EU as part of its
infrastructure can play an important like hydrogen (see further details push to decarbonise gas and
role in future energy systems in Chapter 3), or through a total increase investments into green
as infrastructure for low carbon refurbishment of equipment and projects.
The possibilities of using LNG infrastructure as a

carrier of hydrogen and other low carbon gases
The future proofing of LNG natural gas consumption through which low carbon gas will be
infrastructure is based on the e-methane and has set targets for the preferred energy transition
possibilities for re-utilisation to synthetic methane uptake in gaseous energy carrier, or
process low carbon gases. existing infrastructure of 1% by whether several low carbon
Examples are liquefied bio- or 2030 and 90% by 2050. The gases will be used in parallel to
e-methane, or hydrogen carriers Japanese gas company Osaka facilitate for the transition to lower
like liquid hydrogen, liquid Gas has partnered with companies carbon gas consumption. Two
organic carriers, or liquid in both Peru and Australia other prominent solutions for
ammonia. Both bio-methane investigating the possibilities of re-utilisation of gas infrastructure
and e-methane are especially using surplus supply of renewable are either through liquefied
interesting, as they have the same energy, e.g., solar PV in Peru, to hydrogen (LH2) or converting
composition as natural gas, produce green hydrogen and hydrogen to ammonia, in
meaning that current LNG combine this with either carbon which both methods include
infrastructure is 100% compatible from direct air capture (DAC) or liquefaction. However, hydrogen
with these low carbon liquefied carbon capture from industrial and natural gas are two different
gases. The fact that bio- and sites to make e-methane. The molecules. Liquifying hydrogen
e-methane can utilise existing aim is that this in turn can be requires temperatures as low as
infrastructure, could make them transported to Japan as e-LNG -253 degrees Celsius, compared
attractive and competitive using the existing LNG infrastruc- to -163 degrees Celsius for
measures to decarbonise natural ture, like ships, terminals and LNG. Due to this difference,
gas. For instance, Japan is eyeing regasification facilities. There are, refurbishing LNG infrastructure
a possibility to decarbonise their however, large uncertainties in would require large-scale

investment in insultation upgrades. hydrogen value chain presents These types of solutions
According to some estimates, substantial challenges in view increased the flexibility and wider
tanks at hydrogen liquefaction of high costs in the current accessibility of LNG distribution
and regasification terminals would technology environment. The considerably, especially through
require insulation with 10 times area of refurbishment of LNG their suitability for relocation and
the thermal resistance infrastructure for hydrogen is, serving smaller gas resources and
compared to tanks for LNG. however, gaining attention, and demand centres. With sufficient
With current technology at a further technology development focus and resource, innovation
typical LNG terminal, the tanks is possible and expected. For can open new unknown horizons
account for about 50% of the instance, Germany is investing for liquefied low carbon gases.
investment costs, meaning that 3.8 million euros to study and
the capital expenditure involved enable the utilisation of LNG Import and export infrastructure
in such retrofitting is expected to terminals for various types of for ammonia already exists today,
be significant, which in most hydrogen and its derivatives. typically using ammonia specific
cases is expected to make it Furthermore, given the relevant vessels or liquefied petroleum gas
more viable to build new skills and expertise developed (LPG) vessels. However, the
storage tanks. Additionally, due within the LNG sector, and the quantity of traded ammonia is
to the small size of the hydrogen impressive technology innovation still relatively small. The refurbish-
molecule, the processes around and cost reduction experience for ment of LNG infrastructure for
liquefaction and regasification natural gas, these are examples of use in the ammonia value chain is
could be more prone to leakages. challenges that the gas industry gaining traction. In Europe, this is
This would require hydrogen- has been solving for decades. For in part driven by the increased
specific components such as instance, the floating liquefaction greenfield investments in LNG
valves, pipes, pumps, and tanks, and regasification facilities infrastructure seen after the
which are not compatible with introduced in the mid-2010s and onset of the Russia-Ukraine war in
those used for LNG today. early 2000s respectively, set strict 2022. For instance, the Stade LNG
Therefore, retrofitting of LNG requirements to both weight and terminal in Germany, as displayed
infrastructure for use in the size of the traditional equipment. in Figure 93 below, which is
Figure 93: Hanseatic Energy Hub's planned Stade LNG import terminal in Germany, eventually handling
carbon-free fuels
Source: Hanseatic Energy Hub

currently set to become the gas turbines that can run on come from renewable energy
location for an FSRU by the end of 100% ammonia. Furthermore, a to ensure that the process is
this year, is planned to commence challenge related to the use of emission-free. Due to this, an
operations as an ammonia-ready ammonia as a hydrogen carrier is important step to enable the
facility. The facility operator, that while methods for producing uptake of ammonia in new sectors
The Hanseatic Energy Hub, plans ammonia from hydrogen are well would be to develop offtake
on receiving bio-LNG and known and established through technologies that are able to
synthetic LNG at the terminal, the Haber-Bosch process, the operate on ammonia instead of
before switching to ammonia. In reverse reaction to separate the hydrogen, or commercialisation
Asia, Japan’s IHI is looking into high purity (fuel cell grade) of ammonia cracking. As of H1
possible conversions of LNG hydrogen from the nitrogen 2023, few direct synergies exist
receiving and storage terminals, molecules in ammonia is in the between the ammonia and
that are situated close to gas early stages of development. natural gas value chains –
fuelled power plants, into Large amounts of energy are however, expectations are for
ammonia-based facilities. This is needed for this process, up to this to develop going forward,
in conjunction to their 30% of the energy content in the with power being an area of
partnership with GE to develop ammonia, which would have to probability.
Future role of existing infrastructure

In summary, the LNG infrastructure large developments going short term, while the EU
is bio- and e-methane ready, forward. taxonomy further illustrates the
meaning that the deployment importance of investments in gas
of synthetic and biofuels to As a result, the process of infrastructure with the ability to
decarbonise natural gas and transitioning to low carbon gases switch to low carbon fuels in
LNG, does not require any is expected to be a stepwise order to reduce emissions in
investments in refurbishment process. However, with targets set the longer term. The LNG value
of existing infrastructure. This a by the EU and other nations and chain enhances the unique
considerable advantage of organisations, the decarbonisa- dispatchability, seasonal storage
bio- and synthetic methane tion of gas is inevitable despite possibilities, and flexibility of
compared to other low carbon large uncertainties tied to the natural gas, low carbon, and
gases. However, as discussed in optimal solution to reach overall renewable gases. Hence, they are
Chapter 3, both bio- and targets. Technology and ongoing expected to remain relevant and
synthetic methane is dependent and future R&D developments important as a means of balancing
on technological development will determine the preferred in the future power mix, which
both to reduce production solution of low carbon gases, or will be characterised by a
costs and scale of supply, to the optimal combination of them significant reliance on intermittent
enable wider adoption. When it in the future energy mix. In the renewable energy sources. LNG
comes to the transition from long term, LNG assets will be used has proven to be a critical tool in
LNG to both liquefied hydrogen for low carbon gases, blended providing flexible energy to the
and ammonia, utilising the same gases, and traditional natural gas world. This flexibility will continue
infrastructure for storage and according to different regional to become more valuable as the
distribution, is far from seamless value chains and decarbonisation energy transition unfolds.
with sizeable technical pathways. Greater variability in supply and
challenges and uncertainty demand conditions, stemming
associated with it. The technical There is also large uncertainty tied from increases extreme weather
challenges are also expected to to the future demand of natural events and scaling of intermittent
drive costs which will impact gas, as outlined in the range of renewable generation, will call for
the competitiveness of hydrogen outcomes described in the greater energy security assurance
and ammonia through different degree scenarios. resources. LNG is an ideal
refurbishment. Also, renewable Efforts to decarbonise the current assurance, and it is important
hydrogen and ammonia are in the production and distribution of that investments in LNG
early stages when it comes to gas and LNG, such as the Global infrastructure and supply keep
supply, and both cost and scaling Methane Pledge, will contribute pace with the anticipated system
possibilities are expected to see to lower global emissions in the needs.

Rystad Energy / International Gas Union / Snam
Copyright © IGU and Snam 2023
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Global Gas Report 2023

We are also continuing to witness a high level of uncertainty in

Global Gas Report 2023 3

We emphasize that the prolonged period of low investment in the development of

Global Gas Report 2023 4

1 / Review of the most turbulent year in the history of gas 12

Global Gas Report 2023 5

2019 2020 2021 2022

Source: Rystad Energy Source: Rystad Energy

Global Gas Report 2023 6

Figure 3: International gas prices

USD (real) per MMBtu

120 Reports of sabotage on the Nord

Onset of Russia-Ukraine war

Henry Hub LNG Northeast Asia TTF

Source: Rystad Energy; Argus (LNG Northeast Asia)

Global Gas Report 2023 7

ongoing escalation of the conflict in the Middle East

year-on-year increase, despite volatilities due to 30,000

facility maintenance and outages during the 25,000

context of the globally tight LNG supply, while it was

Europe the biggest importing market, absorbing a

Figure 5: Global carbon pricing map

*~125 USD/ tCO 2e

Source: Rystad Energy; World Bank

Global Gas Report 2023 8

4,000 Stated Policies

Source: IEA; IEE Japan; Rystad Energy

Global Gas Report 2023 9

many applications such as power generation,

reduce emissions. Although there is momentum in 45

to the pressing need to accelerate production and 25

biomethane stood close to 7 Bcm. However, recent 5

of all hydrogen types, supporting the acceleration of

Global Gas Report 2023 10

Global Gas Report 2023 11

Table 1: Key year-on-year changes in global gas market from 2021-2022

Consumption Production Gross imports Gross exports

Regions Bcm % change Bcm % change Bcm % change Bcm % change

Asia 18.9 2.0% 16.4 2.4% 33.2 7.1% 6.7 3.9%

Europe 66.1 11.9% 8.6 3.8% 59.0 11.5% 79.8 38.8%

Africa 5.2 3.1% 2.9 1.1% 1.8 13.5% 6.7 6.4%

Russia 23.3 4.9% 87.2 12.3% 7.0 46.5% 86.4 34.2%

Australia 1.7 3.3% 0.7 0.4% 0.0 0% 0.7 0.6%

World 59.8 1.5% 8.3 0.2% 0.9 0.1% 0.9 0.1%

Source: Rystad Energy

Global Gas Report 2023 13

Global Gas Report 2023 14

Developments in gas demand

1,500 24% 24%

Source: Rystad Energy Source: Rystad Energy

Figure 10: World map coloured by regions

Africa Middle East

Source: Rystad Energy

Global Gas Report 2023 15

Power Industrial Residential Others Power Industrial Residential Others

Source: Rystad Energy Source: Rystad Energy

Global Gas Report 2023 16

Figure 13: EU27 monthly gas consumption

20 2023 consumption has consistently

300 235 300