Royal Dutch Shell PLC expects global LNG demand to reach 700 million tonnes/year (tpy) by 2040, nearly double current levels. Asia is expected to drive nearly 75% of this growth as domestic gas production declines and LNG replaces higher emission energy sources. More than half of future LNG demand will come from countries with net-zero emissions targets, which include China.
Shell anticipates Asian LNG demand growth of as much as 18 million tpy in 2021, with potential US LNG supply growth of up to 20 million tpy.
As demand grows, Shell expects a supply-demand gap to open in the middle of the current decade with less new production coming on-stream than previously projected. Just 3 million tpy in new LNG production capacity was announced in 2020, down from an expected 60 million tpy.
China’s use of LNG in its heavy transport sector nearly doubled between 2018 and 2020, according to one example of Asian emissions reduction cited in Shell’s “LNG Outlook 2021,” reaching 13 million tpy to serve more than 500,000 LNG-fuelled trucks and buses. Shell also expects the number of LNG-fueled vessels to more than double and global LNG bunkering vessels to reach 45 by 2023.
Global LNG trade increased marginally to 360 million tonnes in 2020, according to Shell, despite the unprecedented volatility caused by the COVID-19 pandemic and losses to global GDP of several trillion dollars. Demand in 2019 was 358 million tonnes.
Global LNG prices hit a record low early in 2020, Shell said, but ended the 12-month period at a 6-year high as demand in parts of Asia recovered and winter buying increased against tightened supply.
China and India led the recovery in demand for LNG following the outbreak of the pandemic. China increased its LNG imports by 11% to 67 million tonnes. China’s announcement of a target to become carbon neutral by 2060 is expected to continue to drive its LNG demand.
India also increased imports by 11% in 2020.
Two other major Asian LNG-importing countries – Japan and South Korea – also announced net-zero emissions targets in 2020. To meet its net-zero target, South Korea plans to switch 24 coal-fired power plants to natural gas by 2034, Shell said.
Demand in Europe, alongside flexible US supply, helped balance the global LNG market in first-half 2020. Negative netbacks prompted US supply shut-ins in June, with exports resuming in September. Supply outages in other basins, structural constraints, and extreme weather later in the year resulted in higher prices.
