REW Club: Sanctions and Speculation Curb Global Gas Consumption Growth

May 22, 2023

REW Club: Sanctions and Speculation Curb Global Gas Consumption Growth

Tehran, 22 May – The establishment of autonomous institutions in the finance, insurance, and market regulation sectors, modelled after OPEC+, will significantly increase global gas consumption, with a particular emphasis on Asian markets. That’s according to experts at the Russian Energy Week (REW) club.

“It sounds complicated, but the creation of an independent environment, protected from sanctions or attempts to artificially regulate prices, with long-term relations between exporters and consumers, will significantly boost investment, production, and gas consumption. Consequently, this will lead to a reduction in CO2 emissions,” said Leonid Krutakov, Associate Professor at the Financial University under the Government of the Russian Federation.

The REW Club meeting was held in the framework of the Iran Oil Show 2023 with the support of the Institute for International Energy Studies of Iran.

According to experts, such institutions could be a part of the SCO or BRICS, whose gas consumption needs are projected to grow significantly in the next 20–30 years. However, currently, they are somewhat constrained by the lack of sufficient infrastructure and the limited availability of free resources on the world market.

“The SCO and BRICS are unique in that they unite the world's largest consumers and producers. Consequently, this presents the opportunity to ensure long-term guarantees for investment, production, consumption, and a system of mutual settlements. Such measures will lay the foundation for the establishment of a sustainable market structure,” said Sergey Kapitonov, an analyst at the Project Center for Energy Transition and ESG at Skoltech.

In addition, considering the expansion prospects of the SCO and BRICS, the member countries of these organizations are expected to possess over 40 per cent of the world's proven gas reserves, which are geographically compact.

According to the Gas Exporting Countries Forum (GECF), there is a long-term forecast projecting a 36 per cent increase in global demand for natural gas by 2050 in comparison to 2021 levels, reaching 1,435 billion cubic metres.

By 2050, the growth leaders in energy consumption are projected to be Asia-Pacific (+78 per cent), the Middle East (+60 per cent), and Africa (+152 per cent). According to the FSEG, in Latin America, gas consumption is expected to double, while in Europe, it is anticipated to fall by 37 per cent.

“The growth figures could be even higher if the market becomes more predictable for consumers. If prices jump to USD 2,000–3,000 per thousand cubic meters of gas, it is unlikely that any country will orient its national economy towards gas consumption. Similarly, producers find it challenging to plan investments in production, processing, and transport infrastructure when market prices can fall to USD 50–100 per thousand cubic meters, as witnessed during the height of the 2020 quarantines,” said Alexei Grivach, deputy director general of the National Energy Security Fund.

There are always alternatives available on the market. Currently, coal remains a cheaper and more accessible option, even for EU countries, which recently shut down and then, during the energy crisis, increased generation from coal-fired power plants. However, switching from coal to gas will almost halve greenhouse gas emissions, all while ensuring a secure energy supply.

Furthermore, with the world's proven natural gas reserves being nearly fifty times higher than the current production rate, this commodity is expected to continue its appeal to various sectors of the economy, such as transportation and the chemical industry.

REW Club is a discussion platform of the international forum Russian Energy Week for the expert community, scientists, as well as analysts and management of energy companies.

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