What’s Next for Global Natural Gas Demand?

The ongoing Iran war and limited LNG supply from the Middle East have disrupted expectations of near-term natural gas demand and import costs. In response, economies in Europe and Asia have increasingly relied on renewables and coal for power generation, relying on gas only to a lesser extent. This year's crisis has prompted governments to reassess energy policies, with energy security now a top priority.

The fall in global gas demand this year, driven by high prices, raises questions about the future of gas demand growth. While natural gas cannot replace many industrial processes, electricity-generating systems in major economies still depend on gas for a reliable electricity supply. However, the share of gas in the electricity mix has declined in key markets, including the UK, the Netherlands, Turkey, China, Japan, and South Korea.

The spike in gas prices has accelerated Europe's transition to renewables, which gained momentum after Russia invaded Ukraine in 2022. The share of renewables has risen significantly in the EU and the UK, gradually replacing gas as a reliable backup fuel. Globally, gas's share in the global power mix declined for the fifth consecutive year in 2025, despite a small rise in absolute gas generation.

Clean power, led by solar and wind, met around 68% of global electricity demand growth over the past five years, reducing the need for significant increases in gas power generation.

In emerging economies like China, India, and Brazil, gas power generation plays a limited balancing role, with China's gas share remaining close to 3% of the electricity mix despite rapid demand growth. The economics and energy security case for electricity systems are increasingly aligning, with renewables lowering costs and reducing exposure to fuel price shocks and geopolitical disruptions. As a result, gas is steadily losing its advantages as the default fuel for power system growth.

While natural gas has other key uses, such as in industrial manufacturing and as a feedstock for various products, the AI boom is expected to drive a significant increase in global electricity demand, particularly in data centers. Many countries are positioning themselves as hubs for AI and data center operations, relying on gas to support these growing energy needs.

LNG producers and exporters remain optimistic about long-term gas demand growth, despite the current supply shock reducing consumption amid high prices. Major LNG traders, such as Shell, anticipate a 65% increase in global LNG demand by 2050 from 2025 levels, with gas playing a crucial role in stabilizing the global energy system.