A liquefied natural gas (LNG) terminal at the Yangshan Deepwater port in Shanghai, China, on Saturday, October 9, 2021.
Kelay Shane | Bloomberg | Getty Images
Winter hasn’t even come, but gas prices have already risen to record levels in Europe and Asia due to supply concerns, while many UK energy suppliers have collapsed.
Natural gas supplies are set to rise gradually in the coming years, before jumping in 2025, analysts told CNBC.
But analysts are divided on whether demand will continue to outpace supply in the coming years.
Richard Gorey, managing director of JBC Energy Asia, said the current gas crisis is likely to repeat itself again.
“This is going to be a crisis that repeats over the next three or four years — simply because we don’t have a lot of new natural gas supply coming into the market in that period,” he told CNBC’s “Capital Connection” program midweek. October.
“By 2025, the situation may change, but I think we definitely have two years where we will look at higher energy prices,” he said.
But James Whistler, global head of energy derivatives at shipbroker Simpson Spence Young, said he did not expect prices to remain high beyond this winter.
“Are we always going to have an energy crisis for the next three years? Absolutely not,” he said in an interview with CNBC’s “Street Signs Asia” on Wednesday.
“This is a short-term issue…in March or April of next year, we will see reasonable prices start to appear again,” he said.
Pull towards clean energy
Gurry told CNBC again this week that gas demand is growing “very quickly” as countries try to switch from coal and oil to cleaner energies. He added that this means that the world does not have enough gas and that the market will be very tight for the next three years.
Natural gas is less polluting than other conventional fuels.
While it is expected that the current crisis will pass in February or March, the market is likely to tighten again when the winter season approaches next year and demand increases.
Even if gas shortages don’t trigger another energy crisis, it could cause the world to pull back from coal and oil, said Gavin Thompson, vice president for Asia Pacific Energy at Wood Mackenzie.
In an effort to meet its electricity needs, the UK launched an old coal-fired power plant in September.
Thomson expects gas to “feature a prominent place” in the gradual move toward a cleaner energy mix. However, he said producers are concerned about the gas’s long-term future, and may not be investing in supply.
He cautioned that if producers do not invest enough, buyers may return to conventional fuels.
“This is a huge risk because…slowing the pace of the energy transition will make the 2030 and 2050 goals really difficult to achieve,” he said.
“Confluence of Factors” in 2021
Other analysts expect that gas supplies in the coming years will be able to meet demand.
Gas supply is “improving,” said Anthony Yuen, Citi Research’s head of energy strategy. He pointed out that the main stations for the export of liquefied natural gas have begun to operate, and production is scheduled to increase in Europe, Russia and China.
LNG export facilities cool natural gas and convert it to a liquid state so that it can be transported on board ships to places that cannot receive gas through the pipeline.
He said the crisis this year was the result of a “confluence of factors” – from declining hydropower generation in Latin America to “very strong” energy demand.
He said a period of “really high prices” could cause demand growth to slow, and he wondered where demand would grow fast enough to outpace supply.
However, he did not completely rule out a recurrence of the energy crisis.
“Never say no,” he told CNBC via video call. “It depends partly on [the] weather. But then, once you take into account a number of supply and demand factors, the situation is likely to be much better.”
Yuen said prices are likely to trend lower after this winter, and then fall “a lot more” in 2025 when a number of LNG export terminals are operational.
CNBC’s Sam Meredith and Chloe Taylor contributed to this report.