IEA (2020), Global Energy Review 2019, IEA, Paris https://www.iea.org/reports/global-energy-review-2019, Licence: CC BY 4.0
After two years of very strong gains, natural gas consumption growth cooled down in 2019 to 1.8%, or 70 bcm. This was less than half the growth observed in 2018 and on a par with average growth between 2010 and 2017. Gas demand growth in 2019 was nonetheless second only to growth in demand for renewables, pushing the share of gas in the global energy mix to a historic high of 23%.
While demand rose by over 55 bcm because of fuel switching from coal to gas and by around 50 bcm due to market expansion in 2019, these increases were partly offset by switching away from gas to other fuels (‑23 bcm), and milder temperatures (‑11 bcm). The United States and China remained the main growth markets in 2019, accounting together for over two-thirds of the increase in global natural gas consumption, although gas demand growth rates returned to single digits in both countries.
Fuel switching from coal to natural gas was the largest contributor to consumption growth in 2019, accounting for more than 55 bcm of additional demand. Average annual US gas prices declined by 20% in 2019 reaching USD 2.6 per million British Thermal Units (mmbtu), while in Europe average prices declined by 45%, reaching USD 4.5/mmbtu. Low US and European spot prices drove fuel switching for power generation, while air pollution policy remained the main reason for fuel conversion in China. Yet part of this increase was offset by switching from gas to nuclear, hydro and other renewables in power generation.
In the United States, gas-fired generation output reached new highs in 2019, rising to a record share of about 38% of total generation. It increased by 8% in 2019, or 123 TWh, while coal-fired output fell sharply (-181 TWh). Growth of gas-fired generation was lower than the 172 TWh recorded in 2018, however. Gas-fired generation also increased in Canada and Mexico, in both markets at the expense of coal.
In Europe, output from gas-fired power plants increased by about 11%, or almost 70 TWh, while coal declined steeply (-24%). Spain was the largest contributor to gas burn, with an annual increase of almost 50%. Spain accounted for about 40% of the European Union’s growth, followed by France (14% of EU increase), Germany (13%), the Netherlands (12%) and Italy (10%).
In China, the coal-to-gas switching programme launched in 2017 to battle air pollution helped to further increase the share of natural gas in industrial and residential sectors. Growth was slower than in 2018, however, as rules were introduced in mid-2019 to moderate demand growth. Fuel switching in industry and city gas distribution accounted for an estimated 15 bcm growth in natural gas consumption.
Growth in China, Europe and the United States was partly offset by a reduction in natural gas consumed in several markets. A rebound in nuclear output led to an estimated decrease in gas for power of 12% in Japan and 2% in Korea. Turkey experienced record hydro generation, which sharply diminished gas needs for power generation. Hydro output also surged in Iran, which had to switch back to oil products for power generation at the end of the year due to natural gas supply constraints.
Consumption growth outside of fuel switching was concentrated in the Asia Pacific region and led by China. Growth was slower than in 2018, however, because economic growth was more modest.
China’s economic growth reached an estimated 6.1% in 2019 according to the IMF, its lowest annual increase since 1990. Natural gas demand kept growing but returned to a single-digit rate at 8.6%, less than half the 18.1% increase of 2018. Consumption growth was mainly driven by city gas distribution and industry, spurred in turn by fuel-switching and network expansion to increase the country’s gasification rate.
The rest of the Asia Pacific region played an important part in natural gas market expansion in 2019. Expansion in South Asia was mainly driven by growth in LNG deliveries, especially in India and Bangladesh, though Pakistan’s imports almost stagnated. Natural gas consumption also increased in most Southeast Asian markets. Consumption rose in Australia mainly because the energy industry’s needs grew as the country expanded its LNG export capacity.
Outside of the Asia Pacific region, most of the consumption growth not due to fuel switching occurred in natural gas-producing regions. In the United States, non-power growth was primarily driven by the energy industry’s own consumption to support the expansion of domestic natural gas production, which increased by 10% in 2019. Natural gas consumption further developed in the Middle East and North Africa due to increases in electricity demand and network expansion for residential customers in Algeria and Iran. In Egypt, however, consumption growth slowed significantly after two years of strong increases.
Natural gas consumption decreased in Eurasia and South America in 2019. After three consecutive years of growth, Russia’s consumption was curtailed by the country’s low economic growth. Consumption fell by 2% in the first nine months of 2019 (i.e. excluding the impact of mild temperatures at the end of the year). Consumption decreased slightly in South America, as gas needs for power stagnated in Argentina and Brazil, domestic production fell in Colombia, and Venezuela’s output declined further.
Gas demand is likely to have been curbed by the winter of 2019/20, one of the warmest on record in most countries of the northern hemisphere. Mild temperatures in December reduced energy consumption needs for heating, especially natural gas needs. Preliminary estimates suggest that European consumption from residential and commercial customers decreased by 2% to 3%. Residential consumption declined by almost 20% in Ukraine.
The conjunction of slower demand growth – in particular, lower weather-related consumption – and a well-supplied market led to a sharp increase in storage inventory. The end-of-year US underground storage level increased by 15 bcm as production growth outpaced domestic and export market demand. In Europe, LNG imports surged by almost 70%, as LNG supply increased faster than demand in emerging markets, especially over the second half of 2019. Algeria, Norway and Russia faced lower demand for their competing pipeline supplies. The end-of-year level of underground storage also increased, by 22 bcm. Net injections into US and European storage together accounted for the equivalent of half of the global natural gas consumption increase in 2019.