Demand for liquefied natural gas worldwide is forecast to hit 700 million tonnes by 2040 and Asia is expected to drive nearly 75 percent of this growth as Asian domestic gas production declines and LNG imports are used to tackle air quality concerns, according to the fifth Royal Dutch Shell annual outlook on LNG.
“For instance, China’s heavy-duty transport sector consumed nearly 13 million tonnes of LNG in 2020, almost doubling from 2018, to serve the fast-growing fleet of well over 500,000 LNG-fuelled trucks and buses,” the Shell report noted.
“LNG-fuelled shipping is also growing, with the number of vessels expected to more than double and global LNG bunkering vessels set to reach a total of 45 ships by 2023,” it said.
As demand grows, a supply-demand gap is expected to open in the middle of the current decade with less new production coming on-stream than previously projected.
“Just 3MT in new LNG production capacity was announced in 2020, down from an expected 60MT,” added the report.
Shell explained that because of the net-zero emissions targets companies are having to make, the LNG industry will need to innovate at every stage of the value chain to lower greenhouse-gas counts.
The Anglo-Dutch company noted that over the past year LNG prices hit a record low early in 2020 but ended the 12-month period at a six-year high as demand in parts of Asia recovered and winter buying increased against tightened supply.
“LNG provided flexible energy which the world needed during the Covid-19 pandemic, demonstrating its resilience and ability to power people’s lives in these unprecedented times,” said Maarten Wetselaar, Director at Shell for Integrated Gas, Renewables and Energy Solutions.
“Around the world countries and companies, including Shell, are adopting net-zero emissions targets and seeking to create lower-carbon energy systems,” he added.
“As the cleanest-burning fossil fuel, natural gas and LNG have a central role to play in delivering the energy the world needs and helping power progress towards these targets,” stated Wetselaar.
LNG trade increased to 360MT in 2020 and despite the “unprecedented volatility” caused by the Covid-19 pandemic the industry is moving towards a period of expansion.
China and India led the recovery in demand for LNG following the outbreak of the pandemic with both countries increasing their LNG imports by 11 percent.
“Demand in Europe, alongside flexible US supply, helped to balance the global LNG market in the first half of 2020,” said the report.
“However, supply outages in other supply basins, structural constraints and extreme weather later in the year resulted in higher prices,” it added.