The global energy crisis sparked by Russia’s invasion of Ukraine in February 2022 has transformed the structure of natural gas markets, necessitating closer dialogue between producers and consumers to ensure both short- and longer-term security of supply, as well as to reduce emissions, the International Energy Agency (IEA) reports.

The organisation's latest 'Global Gas Security Review' report, published on July 18, states that tensions in gas markets have eased significantly since the beginning of this year.

However, that deeper coordination among market participants remains essential, given the momentous shifts in how gas markets function, it adds.

“A new global gas market is taking shape after last year’s crisis. Given this, responsible producers and consumers must reconsider their approaches to supply security and flexibility, and cooperate even more closely,” advises IEA energy markets and security director Keisuke Sadamori.

The IEA’s latest assessment of market dynamics shows that gas markets have moved towards a gradual rebalancing since the start of the year. High inventory levels at storage sites in key Asian and European markets provide grounds for cautious optimism ahead of the 2023 to 2024 winter heating season in the northern hemisphere.

If injections continue at the average rate observed since mid-April, European Union (EU) storage sites will reach 90% of their working capacity by early August and could be filled close to 100% by mid-September. However, full storage sites are no guarantee against market volatility during the winter, he notes.

Major uncertainties remain ahead of the upcoming heating season. A cold winter, together with a full halt in Russia piped gas supplies to Europe early in the heating season, could easily renew market tensions. Fierce competition for gas supplies could also emerge if Northeast Asia experiences colder-than-usual weather and economic growth is stronger than expected in China, Sadamori warns.

“The security of global gas supplies remains at the forefront of energy policymaking, with growing complexity for both the short and long term. Liquefied natural gas (LNG) has become a baseload source of supply for Europe, with its share in total EU demand rising from an average of 12% over the 2010s to close to 35% in 2022, similar to the contribution from Russia’s piped gas before its invasion of Ukraine.”

Further, China’s balancing role in global gas markets is set to increase.

Meanwhile, the flexibility of gas supply needs to be reassessed in light of the phase-out of Russian piped gas exports to the EU, says Sadamori.

As producers and consumers engage in closer dialogue to address these dynamics, the IEA ecommends that they should explore the development of innovative commercial offerings, new procurement mechanisms and cooperative frameworks favouring a more flexible supply of LNG.

“Further, meaningful efforts are also needed to reduce the carbon footprint of gas supply chains, including through greater use of low-emissions gases. The new IEA report includes a special focus on integrating low-emissions gases into energy systems. Scaling up the use of these gases will play a critical role in reducing greenhouse-gas emissions from the sector,” he states.