The Global Energy Perspective 2023 models the outlook for demand and supply of energy commodities across a 1.5°C pathway, aligned with the Paris Agreement, and four bottom-up energy transition scenarios. These energy transition scenarios examine outcomes ranging from warming of 1.6°C to 2.9°C by 2100 (scenario descriptions outlined below in sidebar “About the Global Energy Perspective 2023”). These wide-ranging scenarios sketch a range of outcomes based on varying underlying assumptions—for example, about the pace of technological progress and the level of policy enforcement. The scenarios are shaped by more than 400 drivers across sectors, technologies, policies, costs, and fuels, and serve as a fact base to inform decision makers on the challenges to be overcome to enable the energy transition.
Growing global momentum could accelerate the energy transition, as demonstrated by the UAE Consensus, released in December 2023, that calls on Parties to make a just and orderly transition away from fossil fuels. Analysis from multiple sources, including the IEA, IPCC, and McKinsey, suggests that conventional fossil fuels are likely to remain a part of the energy mix to 2050, even in a 1.5° scenario, and may act as a bridge for an orderly transition. Therefore, decarbonizing the fossil fuel system and substantially reducing emissions, including methane, is a key area of focus. Within that evolving context, this article examines the current state of the global natural gas market and the outlook for demand and supply, with a particular focus on liquefied natural gas (LNG). To view our oil outlook, please visit Global Energy Perspective 2023: Oil outlook.
Several uncertainties could impact the market
Given its versatility, natural gas is projected to continue to play a key role in the energy mix irrespective of the pace of the energy transition, with demand projected to grow substantially in the short term. LNG as a delivery mechanism will assume an increasingly important role in linking geographically disconnected demand and supply centers.
However, our analysis of the scenarios shows that several key uncertainties remain around how the market could develop. These can be grouped broadly into four factors:
- Technology: The role of gas in the power sector may be challenged by the accelerated development of batteries in terms of costs and load capacity.
- Geopolitics: The potential for gas flows to Europe to increase could severely impact global LNG demand and push the market into oversupply.
- Regulatory: Increasing recognition of the life-cycle emissions associated with natural gas and LNG and decarbonization of emissions could affect gas supply and demand.
- Project delivery risk: Recent inflationary pressure has resulted in cost escalation for under-construction LNG projects, which could lead to delays in delivery.
It will be important to closely monitor these potential sources of uncertainty to keep abreast of key market developments.
To request access to the data and analytics related to our Natural gas outlook, or to speak to our team, please contact us.