Natural gas has long been viewed as a crucial bridge in the global shift from coal to renewable energy. While coal still leads power generation, accounting for 35% of global electricity output in 2024, natural gas follows at 20%. Its cleaner emissions profile has helped it steadily replace coal-fired plants in many regions.
Now, natural gas is gaining renewed attention as power demand surges worldwide. Morgan Stanley recently predicted a new growth cycle for the U.S. gas market, driven by energy-hungry technologies such as artificial intelligence (AI) data centers, clean manufacturing, and cryptocurrency mining. According to the International Energy Agency (IEA), global electricity demand rose 4.3% in 2024, up from 2.5% in 2023.
However, analysts warn that the natural gas sector may face new obstacles.
A report from Wood Mackenzie suggests that gas turbine development could face a “turbo lag” between 2025 and 2040 due to rising construction costs, manufacturing limits, and increased competition from renewables. Global gas turbine orders surged by 32% year-over-year in 2025, driven by demand forecasts for AI, electrification, and hydrogen production.
Yet, Wood Mackenzie cautions that in regions like the U.S., falling power prices and higher capital costs could make new gas-fired generation uneconomical. In Asia, high costs for imported gas will remain a key challenge, while in Europe, climate goals will restrict further gas growth.
“Natural gas will play a role in the energy transition through 2040,” said David Brown, Director of Energy Transition Research at Wood Mackenzie. “But its growth will be capped by fuel costs, construction expenses, and the falling costs of renewables and storage.”
Despite these headwinds, Wood Mackenzie forecasts 890 gigawatts of new gas-fired power capacity to be added globally by 2040. The U.S. and China are expected to lead, contributing nearly half of these additions. India, Southeast Asia, and the European Union will account for most of the remaining growth.
Meanwhile, in Europe, geopolitical tensions continue to cloud the future of gas supply.
Recent peace talks proposed by Russia to be held in Turkey failed to materialize after President Vladimir Putin did not attend, instead sending a lower-level delegation. Ukrainian President Volodymyr Zelenskyy also did not participate directly, further reducing hopes for progress.
In response, the European Union has threatened to tighten sanctions on Russian gas exports unless a ceasefire agreement is reached. European Commission President Ursula von der Leyen said the EU will expand restrictions on Russia’s access to military technologies and has added 189 ships from Russia’s shadow fleet to its sanctions list. This would mark the 17th sanctions package imposed by the EU.
“This war has to end. We will keep the pressure high on the Kremlin,” von der Leyen said.
The EU has already announced plans to halt new Russian gas contracts by the end of 2024 and terminate existing agreements by 2027.
Analysts at Standard Chartered believe it is unlikely that Russian pipeline gas will return to Europe, even if peace talks move forward. They note that current pipeline flows from Russia to the EU are minimal and are not expected to increase.
As of April, Russian gas deliveries via pipeline into the EU had fallen more than 90% from 2021 levels, averaging just 42.5 million cubic meters per day. Including LNG, net Russian flows into the EU dropped 79% compared to 2021.
These developments underline a changing global energy landscape, where natural gas remains vital but increasingly constrained by economic, political, and environmental pressures.
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