Natural gas consumption grew by an estimated 70 bcm in 2019, a year-on-year growth of 1.8 per cent, in line with the average growth rate experienced over the period 2010-17. This result reflects a cocktail of mixed signals – positive from fuel switching to gas and negative from slower economic growth and mild temperatures. Natural gas demand kept growing, but returned to a single-digit rate of 8.6 per cent (less than half the 18.1 per cent year-on-year increase of 2018).

City gas distribution (CGD) and other industrial segments remained the main drivers of consumption growth in 2019, resulting from a combination of fuel switching measures and network expansion. The rest of the Asia Pacific region played an important role in natural gas market expansion in 2019.

In China the coal-to-gas conversion programme (launched in 2017 to battle air pollution) helped to further increase the share of natural gas in the industrial and residential sectors in 2019. Fuel switching in industry and CGD for residential and commercial uses accounted for over half of the total increase in natural gas consumption.

In the residential and commercial sectors, higher demand from the development of CGD has been witnessed in a handful of countries – China, India, Russia, Iran and Algeria. This is partly offset by structural decline in mature regions and lack of growth potential in most emerging areas where heating needs are limited.

However, natural gas is expected to experience its largest demand shock on record in 2020 as the Covid-19 pandemic hits an already weakened market. After a slowdown in annual growth in 2019, natural gas consumption was negatively impacted in early 2020 by an exceptionally mild winter in the northern hemisphere. This was soon followed by the imposition of partial to complete lockdown measures in response to Covid-19 and an economic downturn in almost all countries and territories worldwide.

In spite of an expected gradual recovery in 2021, the Covid-19 crisis will have long-lasting impacts on natural gas markets. This is because the main medium-term drivers of demand growth are subject to several key uncertainties.

This report provides a detailed analysis of recent natural gas market developments, assesses the impact of the Covid-19 crisis on the short to medium terms and discusses the main drivers and uncertainties to future gas supply and demand to 2025.