Shell says $200 billion required to meet 2030 LNG boom, looking to advance LNG Canada project

A decline in spending since 2014 due to weak energy prices could create an LNG demand boom beginning in the mid 2020s.  Shell photo.

LNG demand expected to hit 500 million tonnes per year by 2030

Royal Dutch Shell says it is considering moving ahead on liquified natural gas projects in Canada and on the US Gulf Coast to meet increasing LNG demand that could rise by two-thirds by 2030.

Currently, LNG demand is expected to grow from the current rate of 293 million tonnes per year (mtpa) to 500 mtpa by the end of the next decade.

The head of integrated gas and new energies at Shell, Maarten Wetselaar, warns that supplies are currently seen slipping to 300 mtpa because of a lack of new projects and natural declines in existing production.

Shell says in its 2018 LNG Outlook that over $200 billion in LNG production investment is required to meet the boom in demand by 2030.

At this time, supply is more than meeting demand as new facilities approved for construction in the first half of this decade are coming online.

However, spending cuts by the industry hurt by drastic reductions in commodities prices are expected to create a supply gap beginning in the mid 2020s unless there is a rise in new investments in LNG production.

Wetselaar says the cost of developing the required capacity is about $1 billion per mtpa.  This cost does not include investments in the development of gas fields linked to LNG plants.  The LNG plants cool natural gas to about minus 160°C and the liquified fuel is then shipped to demand centres and converted back into gas.

“The industry is still looking at quite a challenge to build supplies to meet demand in the 2020s,” Weselaar said.

This year, Shell is expected to begin construction on its Prelude floating LNG plant in Western Australia, one of the largest and most complex gas projects on the globe.  The company is also looking at moving forward LNG Canada and Lake Charles projects, says Wetselaar.

“Our investment cycle is coming to an end with Prelude coming on stream this year. We will have the space to take investment decisions, (but) it doesn’t necessarily mean we will spend the money.”

Proposed projects are facing off against lowest-cost gas hubs in the US where the shale boom has resulted in abundant and cheap supplies, as well as Qatar, Russia and East Africa.

“In order to take a final investment decision on a project of this size you want to make sure it is as low-cost as it can be because the cost of an LNG project … is going to stick with you for 30, 40 years,” Wetselaar said.

In the report, Shell forecasts global LNG demand to grow by 2 per cent per year until 2035, making it the fastest-growing source of energy over the period.

Shell says LNG demand is expected to grow twice as quickly at gas power plants in China, South Korea and India as these countries shift from coal-fired electricity and governments focus on carbon reductions.