IEA Calls for Strategic Gas Reserves Amidst Geopolitical Market Shocks

The International Energy Agency (IEA) is urging governments to strengthen natural gas reserves and increase flexibility in liquefied natural gas (LNG) markets to protect consumers against supply disruptions. In a report titled Gas Reserve Mechanisms and Flexibility Options, the IEA outlined measures countries could implement over the next five years as gas markets become more interconnected but increasingly vulnerable to geopolitical shocks.

The proposals include mandatory commercial storage obligations, government-controlled strategic reserves, LNG buffer stocks, joint reserves using existing infrastructure, and cross-border stockholding arrangements. The IEA also recommended examining pooled LNG purchase options and agreements allowing countries to access additional cargoes during emergencies.

The report follows two major gas-supply crises in five years: reduced Russian pipeline deliveries to Europe after the start of the Ukraine war in 2022, and disruption to LNG shipments through the Strait of Hormuz due to the ongoing Iran war. The IEA warned that competition for limited LNG cargoes during severe disruptions could cause extreme price volatility and significant economic damage without necessarily preventing physical shortages.