The globalization of gas

Dr. Carole Nakhle

This article was first published on GeoExpro Magazine (Vol. 21, Issue 2, 2024)

In 2022, Europe witnessed an energy crisis like no other in modern times. Natural gas prices soared, hitting a historic high of more than €330 per MWh in August 2022. A year later, European energy markets seem to have shifted from scarcity to plenty; gas prices have hovered at a fraction of their 2022 peak, even though the main culprit behind the 2022 crisis – the war in Ukraine – is still ongoing.

Several developments have led to such a contrasting picture over a relatively short period, chief among them is the evolution of gas trade and primarily its globalization through LNG – a trend that is unlikely to be reversed.

Although gas trade remains largely a regional affair with only 24% traded globally, gas markets are undergoing notable changes. The global LNG trade has proliferated in recent years, driven by increasing demand for natural gas as a cleaner energy source and the availability of new sources of supply from countries such as the US, Australia, Qatar, and East Africa.

Between 2011 and 2021, interregional LNG trade grew more than four times as fast as pipeline trade and in 2020, for the first time, the share of gas traded as LNG overtook that by pipeline. While regional gas markets continue to exhibit significant differences in consumption, production, transport infrastructure and pricing, with the advent of LNG, hitherto isolated regions have increasingly become interconnected, and a globalized gas market is gradually emerging, with major implications on pricing and the relationship between producers and consumers as well as geopolitics.

Those changes have shortened the length of the energy crisis of 2022 in Europe; had the crisis occurred a decade ago, the impact would have been much more detrimental.

Related Analysis

There is a simple reason why oil and gas companies keep investing in new projects“, Dr Carole Nakhle, Apr 2024

Energy Security, Affordability and Sustainability: The Grand Alliance“, Dr Carole Nakhle & Ron Beck, Jan 2024

COP28: A ‘historic’ climate deal?“, Dr Carole Nakhle, Jan 2024

Share this:

Recent Posts