Will Biden's Pause on LNG Terminal Permitting Upend IEA Forecast of Global Demand Growth for Gas in 2024?

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--One of the main conclusions in a recently issued report from the International Energy Agency (IEA) (Paris, France) on the global natural gas market, that worldwide demand for gas will increase about 2.5% this year, might be in peril due to President Joe Biden's January 26 decision to pause permitting for proposed liquefied natural gas (LNG) export terminals. Ironically, the IEA report, Gas Market Report, Q1 2024, was released the same day the president's pause was announced.

Click on the image at right to see year-over-year changes in demand for piped natural gas and LNG.

For more on the Biden LNG pause, see January 26, 2024, article - Biden Administration Pauses its Review of Permits for Proposed LNG Export Terminals, and January 29, 2024, article - Biden's Permitting Pause Likely to Impact at Least Five Advanced U.S. LNG Projects. Though the statement from the White House lacked specifics, many analysts said the pause, coupled with the public comment period on whatever the Department of Energy (DOE) proposes, would push any final decision on permitting proposed LNG export terminals past the November election.

"The global gas market is entering a new period as the world gradually emerges from an energy crisis that had profound impacts on both the supply and demand sides," Keisuke Sadamori, IEA's director of energy markets and security, said in a statement accompanying the release of the report.

"We expect to see solid growth in global gas demand this year as prices have come down to relatively manageable levels. But the speed at which this new demand can be met will be critical, particularly as supplies are tight and substantial new LNG capacity will only come online after 2024."

The IEA report said geopolitical uncertainties would be the biggest risk factor for global gas markets in 2024. Russia's two-year-old invasion of Ukraine, "heightened tensions in the Middle East and concerns over deliberate interference with critical infrastructure such as pipelines all have the potential to generate further volatility," observed Gas Market Report, Q1 2024.

The U.S. accounted for about 80% of the growth in global LNG export supply in 2023, becoming the world's largest LNG exporter, the report noted. Although U.S. LNG exports surged in 2023, on balance worldwide additions to LNG export capacity were short of expectations, it added.

Global gas supplies were tight in 2023 due to the shortfall in worldwide LNG export capacity, the Gas Market report said. Production growth was not sufficient to offset the continued decline of Russian pipeline gas to Europe, it added.

Even before the Biden administration paused its permitting for LNG terminals, the IEA report forecast global gas supplies would be tight in 2024. It predicted a limited increase in global LNG export capacity would restrain demand growth and possibly push up prices. Before Biden's pause scrambled expectations for the global LNG market, the Paris-based energy agency predicted LNG supplied would grow by about 3.5% this year, down significantly from the 8% surge witnessed over the 2016-2020 period. It recognized that delays in bringing new liquefaction plants online and issues surrounding the availability of feedgas at existing projects could push back supply growth to 2025. It may get pushed back further still.

The report highlighted the drivers of gas demand in different world regions. In the U.S., demand from the Power sector accounted for most of the demand growth in 2023. But overseas, industrial demand was the leading factor driving growing demand in Asia Pacific and the Middle East.

Click on the image at right to see year-over-year changes in gas demand by sector and world region from 2022 to 2023.

Global gas demand rose about 0.5% in 2023, an improvement over 2022's decline of about 1.5%, the report noted. Factors contributing to last year's weak demand growth included "the rapid expansion of renewables and improving nuclear availability weighed on natural gas demand in Europe and mature markets in Asia, driving prices lower. Mild winter weather conditions, together with gas-saving measures, also reduced gas use in the residential and commercial sectors. As such, global gas demand grew by an estimated 0.5%," the report said.

Demand growth last year came mostly from China, North America and the gas-rich markets in Africa and the Middle East, the IEA said. China's overall gas demand rose about 7% last year, most of which was met by rising imports of LNG. China regained its position as the world's largest LNG importer.

The Gas Markets report noted that gas prices decreased significantly in 2023 compared with their 2022 highs but remain well above their historical averages in Asia and Europe. In the U.S., gas prices have fallen in recent days. The potential year-long loss of the gas market's biggest driver, LNG exports, appears to be weighing down an oversupplied market.

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