Demand for natural gas
Sustained natural gas demand
We expect sustained demand for natural gas, especially in Asia and for the decades ahead, supporting our confidence in the value of our current portfolio of producing assets and our sanctioned projects. We also consider these factors carefully in connection with future investment opportunities.
As an example, China, Japan, South Korea, and all countries within the ASEAN bloc are signatories to the Paris Agreement and have plans to reduce emissions. Collectively, they represent some of the world’s largest economies and more than 25% of the world’s population. The national energy plans of these nations also confirm ongoing demand for natural gas.1,2,3,4
The International Energy Agency’s (IEA’s) 2024 World Energy Outlook (WEO) increased the modelled 2050 demand for LNG in all three of its scenarios including the 1.5°C aligned “Net Zero Emissions” scenario, compared to the 2023 WEO.5
Why is natural gas part of the energy transition
This sustained demand for natural gas is part of, not instead of, the energy transition – as countries work towards energy security, affordability and emissions reductions goals. Energy transition priorities in Asia include maintaining secure reliable and affordable supplies while also progressively reducing emissions.
Coal demand is continuing to grow in the Asia Pacific region and is driving GHG emissions globally. Addressing this growth while maintaining energy security has been a priority for global climate and energy policy. In response to policy signals and technology improvement, renewables are growing quickly, especially in China. In addition to this growth of renewables, sustained use of natural gas can preserve energy security, support renewables by firming their intermittency and also directly replace coal where infrastructure allows. To illustrate the potential of this, in 2023 coal-to-gas switching was the largest single driver of emissions reduction in the US power sector.6 As well as power generation, we also expect sustained use of natural gas in heavy transport and other hard-to-abate sectors. (See chart below)
Natural gas demand is sustained by these factors:
- Transition priorities. While renewable sources of energy are growing, particularly in countries like China, they have not reached the scale to fully replace coal at current energy demand levels. Total energy demand is also expected to grow as a result of extra power demand expected for electric vehicles and data centres. Sustaining gas supply levels so that available renewables can be directed to higher emissions reductions (like substituting coal first) can support both energy security and faster emissions reduction.7
- Firming renewables. Natural gas can support more renewables to replace coal, by “firming” up their intermittent supply along with batteries.
- Fuel switching. Natural gas is an established substitute for coal in power generation where infrastructure exists and can accelerate the impact of coal-to-renewables switching. In 2023, coal-to-gas switching was the largest source of emissions reduction in the US power sector, according to the IEA.8
- Hard-to-abate sectors. Some uses of natural gas are 'hard-to-abate' and will be sustained for longer – such as very high temperature industrial heat (in glass, ceramic and steel production) or as chemical feedstock (in fertiliser production).9
The use of gas in power grids that are decarbonising
Australia’s National Electricity Market serves as an example of how a gas-renewables mix can generate power at lower emissions intensity than a coal-dominated mix. In 2024, power generation in South Australia is mainly from renewables with nearly one third from gas, and has only a third of the emissions intensity of power generation in Victoria, which relies mainly on brown coal.
Footnotes
Footnotes
