LNG demand is set to rise significantly, according to Royal Dutch Shell’s annual LNG Outlook report. Last year, demand for liquified natural gas rose by 27 million tonnes to 319 million tonnes, according to the global energy giant. Shell photo.
LNG demand grows as China works to improve urban air quality
In its annual LNG Outlook, Royal Dutch Shell forecasts global demand to rise significantly due to the drive for cleaner-burning fuel in Asia.
Last year, global LNG demand grew by 27 million tonnes to 319 million tonnes according to the Shell report. In 2020, the global energy company expects LNG demand to reach about 384 million tonnes.
LNG supply is expected to rise by 35 million tonnes this year and Asia and Europe are set to absorb all the additional supply. Despite a rebound in long-term LNG contracting last year which could revive investment in liquefaction projects, Shell expects LNG supplies to tighten into the mid 2020’s.
“We saw Asian LNG demand growth exceed expectations again in 2018 and we expect this strong growth to continue,” said Maarten Wetselaar, Integrated Gas and New Energies Director at Shell. He added “Investment in new supply projects is picking up, but more will be needed soon.”
China is continuing its efforts to improve urban air quality. Because of Beijing’s efforts, Chinese imports of LNG climbed by 16 million tonnes last year, up 40 per cent from 2017.
“The continued surge in Chinese LNG imports has helped improve air quality in some of its biggest cities over the last few years,” said Wetselaar. “China’s success in making the air cleaner for millions of people shows the critical role that natural gas can play in providing more and cleaner energy to the world.”
On the supply side, Australian LNG exports caught up with those of long-time leading supplier Qatar towards the end of 2018 and are expected to rise by 10 million tonnes in 2019. Both countries are well-positioned to supply rapidly developing economies across Asia with gas they need to improve air quality by displacing coal-fired power and heating.
Last October, LNG Canada announced that its joint venture participants, Shell, PETRONAS, PetroChina, Mitsubishi Corporation and KOGAS – made a Final Investment Decision (FID) to build the $40 billion LNG Canada export facility in Kitimat, British Columbia.
LNG Canada will offer an approximately 50 per cent shorter route to the lucrative Asian market compared to LNG facilities along the US Gulf Coast.
Since 2000, LNG trade has increased from 100 million tonnes to 319 million tonnes last year. LNG is playing an increasingly important role in the global energy system in the past few decades as a number of countries are shifting to natural gas to meet their growing energy needs.
The average length of contracts signed more than doubled from around 6 years in 2017 to about 13 years in 2018. Meanwhile, the total contracted volume more than doubled to almost 600 million tonnes in 2018.