Fragility in the global energy markets in recent years has provided ample evidence that the energy transition will be possible only with security of supply and access to affordable energy.
We know these levels of uncertainty are set to continue as we move through the transition, yet current levels of investment in natural gas supply are insufficient to meet the demand trend towards 2030—let alone to 2050. This should be of critical concern to us all, given that natural gas has the greatest potential to complement renewables in the energy transition, providing the reliability needed to balance intermittency and scalability issues.
In addition, 2023 became another record year for emissions from coal use. Shifting from coal to natural gas is the most readily available, cost-effective way to cut emissions in half immediately. However, the investment decisions that will enable provision of the gas supply and infrastructure that will underpin the transition 5–6 years from now risk not being made today.
Investments on the gas supply side, sufficient to deliver the volumes that may be needed in a 5–10-year timeframe, must be made now, given that conventional gas fields can take anywhere from 5–8 years to develop. Living in an era of high energy uncertainty has profound implications for investment decisions, energy infrastructure development and technology planning.
Gas demand growth from economic development and improved living standards in the developing world, alongside new consumption trends, is keeping gas demand strong, while producing capacity and infrastructure investment are not keeping pace.
These trends challenge the assumptions of falling energy demand growth that various institutions make in their outlooks. Put bluntly, if energy use continues to evolve as it has in recent years, actual demand will significantly diverge from scenario pathways, potentially leading to a significant gap between demand and available supply of gas and low-CO₂ energy.
Supply shortfall
Between the current projected demand and the volumes from current gas supply, without any further investment there will be a supply gap of around 1,300bcm (29%) by 2030, according to the International Gas Union’s (IGU’s) 2024 Global Gas Report.
New sources of power demand are also emerging. AI-focused datacentres are driving a surge in electricity demand, especially in the US. Extreme weather conditions are significantly increasing global cooling demand, especially in developing countries with low but growing air conditioner ownership—such as India.
As cooling becomes the fastest-growing energy use in buildings, it puts upward pressure on electricity demand, carving a space for gas to meet these needs. The ability of gas to provide a stable energy supply complements the intermittent nature of renewables such as wind and solar, making it a well-suited source to mitigate these rising energy demand needs.
Investments in gas supply, storage and infrastructure must also happen in parallel with accelerated investment in decarbonising gas technologies, which must be ramped up by orders of magnitude to be consistent with climate targets. Only then can we ensure the priorities of energy security and energy transition do not undermine each other.
Key role
Repurposed gas infrastructure will play a key role in enabling the large-scale rollout of zero- and low-CO₂ hydrogen, thus supporting scalable production and distribution at a much lower cost. Integrating biomethane—chemically identical to natural gas—into the existing energy system and its efficient distribution will require a connection to the gas grid.
Retrofitting existing natural gas infrastructure could also accommodate pure hydrogen delivery and achieve a reduction in hydrogen delivery cost of 20–60% compared with building new hydrogen pipelines. Repurposing gas power plants, pipelines and LNG terminals for zero- and low-CO₂ molecules represents a substantial cost advantage in the path towards a sustainable transition.
As the world has navigated unprecedented energy, financial and political uncertainty, LNG in particular has proved a critical global enabler of resilience in the past two years. The LNG market continues to evolve, with flexible supplies increasing in smaller markets and from smaller market players.
Global supply and demand balances are key indicators for assessing the need for new, multi-billion-dollar investments in LNG projects, with project financing highly dependent on firm offtake deals for future supplies, according to the IGU’s 2024 World LNG Report.
However, research from the European Economic Review shows that risks related to environmental regulations are increasingly driving up the cost of capital in corporate loan markets through syndicated loans, corporate bonds and higher interest rates charged by banks.
It is critical that such regulations recognise and support regional differences, as gas use varies across countries and global regions. Policies that have cross-border implications, such as sustainable investment criteria or carbon-leakage rules, will need to be recognised and adapted to these differences. If this does not happen, then policies that raise the cost of capital for gas investments will hurt developing regions the most. They will exacerbate the risk of shortfalls in gas supply and unfairly disadvantage developing regions that are struggling to provide their citizens with access to affordable and reliable energy.
As the world faces growing uncertainty, the global gas industry is essential to building more prosperous, secure, and sustainable societies for everyone. It is doing so through energy diversification, innovation and collaboration.
The required investments not only include natural gas and its infrastructure, but also embrace the potential of low-carbon, decarbonised and renewable gases (including hydrogen, biomethane, synthetic gas and e-methane) to drive an even deeper decarbonisation of the energy system.
However, securing this future and balancing the energy trilemma will require continued and sufficient investments across the gas value chain and all the world’s regions so that economies can cope with and adapt to a decline in natural supply and growing global energy demand dynamics.
Menelaos Ydreos is secretary general of the International Gas Union.
This article is taken from Outlook 2025, our annual publication examining the year ahead in energy. Subscribers can click here to read their free copy. The publication can also be bought from our store here.
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