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Global Gas Markets to Stabilize in Q3, LNG Supply Diversifying, Says Industry Leader

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Global gas markets should begin to stabilize in the coming quarter as the reopening of the Strait of Hormuz begins to increase supply, the Secretary General of the Gas Exporting Countries Forum, Philip Mshelbila, said Wednesday at a conference.

"If we assume that the straight is now open and will remain open, our view is actually that in the course of this next quarter we will begin to see some restabilization in the market," he said at the Reuters Global Energy Forum, according to a transcript available on YouTube.

The closure of the Strait of Hormuz, that cut off the flow of about 20% of the world's hydrocarbons supply, led to spikes of about 137% in gas prices in Asia and an 81% surge in Europe, he said.

The impact of damage to gas facilities, like at the Ras Laffan LNG facility in major LNG exporter Qatar would nonetheless have a lingering impact he said, with repairs to that asset expected to take several years.

Offsetting that is the arrival of additional supplies from the US and Canada, without which the impact of the strait's closure would have been "catastrophic", he said.

"That has helped to moderate the impact and is part of why we did not see the prices spike to where they spiked in 2022 for example," Mshelbila said, in reference to the gas price surge that followed Russia's invasion of Ukraine that year.

"So we think that sometime in this coming quarter there will be some moderation and by the fourth quarter of the year we might actually see both flows as well as prices revert back to where they were," he said.

Mshelbila said that if the crisis had persisted for longer, it would have driven more "structural change", without elaborating on exactly how that would have manifested, but analysts say the crisis has increased focus on renewable energy, for one.

Looking further ahead, Mshelbila said that the GECF's forecasts expect global gas demand to rise about 31% over the next 30 years.

China will be a significant demand source within this as it moves from doubly-carbon-intensive coal to increased gas use, while he noted that electrification of transport and data center expansion would sustain demand for power.

The scale of global investments in LNG, which some analysts have predicted could eventually lead to oversupply, will diversify the supply of this form of gas and provide more resilience against crises such as the Iran war, the GCEF Secretary General said.

Mshelbila said that the combination of global population growth and larger urban populations as well as electrification of economies would likely lead to a doubling of global power demand.

While acknowledging the challenge of climate change, he said that battery systems could not take on a role as the main source of baseload power provision, due to comparatively higher costs.

"Because renewables do not give you the reliability that you need 24/7, you are going to need both battery and natural gas in order to create that stable supply of electricity that AI will need," he said.

"And so I always say that for us, you know, renewables are actually a partner to natural gas and they work hand in hand. They complement each other and and we see both growing."

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