Global demand for liquefied natural gas (LNG) is set to grow more than 50 percent against the current level driven by China’s shift from coal to gas and economic development in South and Southeast Asia, according to Shell PLC.
LNG trade last year increased to 404 million metric tons from 397 million metric tons 2022, Shell said in an outlook report.
While natural gas demand has already peaked in some regions, it continued to rise globally “with LNG demand expected to reach around 625-685 million tonnes a year in 2040, according to the latest industry estimates”, Shell said in a press release accompanying the report, both accessible on its website.
Steve Hill, executive vice-president of the Shell Energy brand, explained, “China is likely to dominate LNG demand growth this decade as its industry seeks to cut carbon emissions by switching from coal to gas”.
“With China’s coal-based steel sector accounting for more emissions than the total emissions of the UK, Germany and Turkey combined, gas has an essential role to play in tackling one of the world’s biggest sources of carbon emissions and local air pollution”, Hill added.
Another contributor to the projected growth in global LNG demand is the decline of domestic gas production in parts of South and Southeast Asia at a time of economic growth in these regions, Shell said. “Over the following decade, declining domestic gas production in parts of South Asia and South-east Asia could drive a surge in demand for LNG as these economies increasingly need fuel for gas-fired power plants or industry”, the media release stated.
Regasification Capacity Expansion
However Shell noted South and Southeast Asia “need significant investments in gas import infrastructure” to meet demand.
In Southeast Asia the Philippines is expected to have added 1.1 billion cubic feet per day (Bcfpd) of regasification capacity by the end of 2023, according to a report by the United States Energy Information Administration (EIA) August 30. That is on top of capacity from two terminal projects completed earlier last year as announced by the Philippine Energy Department June 2.
Neighboring Vietnam is expected to add 100 million cubic feet per day by the end of 2024, the EIA said in the report on its website. Vietnam only has one operational regasification facility so far, according to Petrovietnam Gas JSC, which owns the 1.0 million metric tons per annum Thi Vai LNG Terminal.
Globally, regasification capacity is poised to expand to 163 Bcfpd by the end of 2024 with 55 countries having LNG terminals, according to the EIA report, which used data from the International Group of LNG Importers and trade press.
The EIA said Asia would lead the growth in global regasification capacity in 2023 and 2024 accounting for 52 percent or 11.9 Bcfpd. Europe would comprise 30 percent or 8.6 Bcfpd and the rest of the world 10 percent or 2.3 Bcfpd.
The bulk of the Asian expansion, at 8.5 Bcfpd, is projected to be in China.
‘Structurally Tight’ Market
While regasification capacity is growing, available capacity has already been exceeding LNG import volumes with only 39 percent of the capacity used per year, according to the EIA report.
“Spare regasification capacity, most of which is in Japan, South Korea, and China, allows countries to meet occasional demand spikes, particularly in winter”, it said. “Last year [2022], global LNG trade used 37 percent of available regasification capacity, or 51.7 Bcf/d”.
In 2023 high gas storage levels along with mild winter temperatures, stronger nuclear power generation and China’s modest economic recovery contributed to balancing the gas market, which remained “structurally tight”, Shell said in the news release.
These factors “helped bring down and stabilize gas prices in the key importing regions of Europe and East Asia compared to the record highs and unprecedented volatility seen from late 2021 through 2022”, Shell said. “However, gas prices and volatility remained significantly higher in 2023 than in the 2017-2020 period.
“Despite a well-supplied global market in 2023, the lack of Russian pipeline gas supply to Europe and a limited amount of LNG supply growth over the last year mean that the global gas market remains structurally tight”.
