Energy agency warns of steep gas price hike as China demand grows

The International Energy Agency (IEA) has warned of a possible rise in natural gas prices to new records, spurred on by unpredictable consumption rates in China.
Although prices fell in recent months, this could change in the current year as demand in Asia and especially China picks up, the IEA said in its gas market report published in Paris on Tuesday.
As the world's largest importer of natural gas, China recently lifted the Covid-19 restrictions that dampened domestic demand last year, the report noted.
In an optimistic scenario, renewed demand growth for liquefied natural gas (LNG) in China could be as high as 35%, according to the IEA. This would trigger fierce competition in international markets and could lead to gas prices returning to the unsustainable levels of last summer - a particular concern for European buyers.
"Last year was exceptional for global gas markets. Prices are returning to tolerable levels, especially in Europe, where a mild winter and a drop in demand contributed to cooling markets," said IEA's director for energy markets and security, Keisuke Sadamori.
"China is the big unknown in 2023, and if global LNG demand returns to pre-crisis levels, it will only increase competition in global markets and inevitably drive prices up again."
Despite the increase in global LNG demand in 2022, supply growth was relatively modest at 5.5%, the IEA said. Investment has been sluggish due to rising construction costs and ongoing contract renegotiations.
However, many projects were already on the point of receiving further investment - including several in North America and the North Field South expansion in Qatar - and were making significant progress towards a final decision, the report added.