Worldwide liquefied natural gas demand is expected to double by 2040 to 700 million tonnes, according to third party forecasts, Royal Dutch Shell reports in its Fourth Annual LNG Outlook, Kallanish Energy reports.
LNG in 2019 rose a robust 12.5%, to 359 million tonnes, Shell stated. “The global LNG market continued to evolve in 2019, with demand increasing for LNG and natural gas in power and non-power sectors,” said Maarten Wetselaar, Shell’s Integrated Gas and New Energies director. “Record supply investments will meet people’s growing need for the most flexible and cleanest-burning fossil fuel.”
Shell said the industry experienced “key developments” in 2019 helping to reshape the industry, including:
- An industry record of 40 million tonnes of additional supply becoming available and consumed by the market
- The belief in long-term demand growth triggered record investment decisions in liquefaction capacity totaling 71 million tonnes
- An increase in diversity of contractual structures, providing a wider range of options to LNG buyers
- The growing role of gas in improving air quality through coal-to-gas switching in the power and industrial sectors, with coal generation phase-out announcements more than tripling.
“While we see weak market conditions today due to record new supply coming in, two successive mild winters and the Coronavirus situation, we expect equilibrium to return, driven by a combination of continued demand growth and reduction in new supply coming on-stream until the mid-2020s,” Wetselaar said.
Europe absorbed the majority of 2019 supply growth – imports increasing 74% – as competitively-priced LNG furthered coal-to-gas switching in the power sector, replacing declining domestic gas production and pipeline imports.
“New spot-trading mechanisms and a wider variety of indices used for long-term contracts point towards LNG becoming an increasingly flexible commodity,” according to Shell.
There was a small rise in imports to Asia in 2019, compared to the previous two years, a result of mild weather and rising electricity generation from nuclear power in Japan and South Korea, two of the three largest global importers.
In China, LNG imports increased 14% in 2019, as efforts continued to improve urban air quality. Also notable was LNG demand growth in South Asia. In total, Bangladesh, India and Pakistan imported 36 million tonnes, an increase of 19% over last year, pointing to emerging growth countries in Asia.
Shell said Asia is expected to remain the dominant region in terms of LNG consumption for decades to come, with South and Southeast Asia generating more than half of the increased demand.
Projections to 2040 show an increasing role for natural gas and LNG, according to Shell. According to estimates, gas is expected to supply 43% of the world’s additional demand for energy, with renewable energy sources supplying 37%.
It’s estimated the combination of gas and renewables will together supply 80% of the growth in demand. Over half of the growth in natural gas use is expected to come from non-power sectors – such as industry, residential and commercial and transport – as more carbon intensive options are replaced.
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