High global gas prices may threaten Australian fossil fuel megaprojects as growth forecasts for the industry are reduced by as much as a third.
The International Energy Agency (IEA) significantly revised down its forecast for global gas demand until 2024 by almost two-thirds on Tuesday after prices rose to record levels thanks to Russia’s invasion of Ukraine.
“Global gas consumption is forecast to contract slightly in 2022, with limited growth over the next three years, resulting in a total increase of about 140 bcm [billion cubic metres] between 2021 and 2025,” the report said. “That is less than half the 370 bcm increase seen in the previous five years and well short of the exceptional jump in demand of close to 175 bcm seen in 2021.”
Asia is expected to account for 60% of new consumption but the IEA warned that even this growth was at risk as high prices pushed countries to seek alternative fuels.
Australia vies with Qatar as the world’s largest gas exporter and has several large new developments planned, including Woodside’s $16.5bn Scarborough gas project and Santos’s $4.7bn Barossa project. Gas exports are estimated to double in value to $70bn over the next year as Australia fills the gap left by Russian supply.
Government planning has relied on strong growth in the sector driving production until 2040 but Bruce Robertson, an LNG energy finance analyst with the Institute for Energy Economics and Financial Analysis, said new projects were now at risk from “permanent demand destruction”. “It simply makes gas an unaffordable fuel. And that’s what has occurred. We’ve seen major falls in gas demand,” Robertson said. “The pressure on the gas industry is all one way.”