Renewables to eat into future LNG demand

Thursday, 18 March 2021
Free Read

The so called ‘Big 5’ - Qatar, US, Australia, Russia and Mozambique - will account for 73% of global LNG supply by 2030, Poten & Partners said during one of its regular webinars.

Qatar has emerged as a price setter, offering tenders in the low 10% of Brent. Only a few suppliers were willing to compete at this level, Head of APAC Business Intelligence, Sophie Tan, explained.

Sellers were rethinking market strategies and interest in mid to long term contracts was returning. More FIDs were imminent, especially in Australia, she added.

When Qatar gets its four new trains online in 2026, this will raise the producer’s market share back up to around 20% by the end of this decade.

Australia and Southeast Asia LNG production is expected to decline, while Russia’s share will increase to 10% from today’s 8%, while the US is forecast to double its market share to 20%, level with Qatar and Australia will drop to less than 20%.

Demand growth

As for demand, China will become the largest LNG market by mid 2020s. However, its share of LNG demand will remain unchanged at 18% by 2030 in a bigger market.

Strong growth is also predicted in South Korea and Taiwan as the countries switch from coal and nuclear power, although their combined share is expected to decline by 2030 to 30% from 36%.

Growth is also forecast in Southeast and South Asia to 27% of global demand in 2030 from 15%, while Japan is expected to invest in wind and other renewables, resulting in lowering LNG demand, Tan said.

Elsewhere, European LNG demand could fall by as much as 10 mill tonnes this decade, due to a greater renewable uptake.

Carbon prices could double from current record levels of €40 per tonne, which would drive utilities to exit fossil fuel usage, including gas, she said.

Some LNG buyers have been reluctant to sign deals beyond the early 2030s, on the back of rising carbon costs. Renewables could be the answer to these higher costs.

In summary, Tan said that the supply overhang from the previous investment cycle had already been significantly reduced, due to the lack of FIDs last year.

Project developments affected by the pandemic are likely to result in tighter markets from 2023.

As mentioned, LNG demand faces a growing threat from renewables and the drive for low carbon mandates worldwide. In a net zero carbon world, LNG demand could decline as renewables become more cost competitive especially when greenhouse gas (GHG) costs are accounted for, she said. 

Related Video

Free Read