London , February 14, 2024 -- Global demand for liquefied natural gas (LNG) is estimated to rise by more than 50% by 2040, as industrial coal-to-gas switching gathers pace in China and South Asian and South-east Asian countries use more LNG to support their economic growth, according to Shell’s LNG Outlook 2024.
Global trade in LNG reached 404 million tonnes in 2023, up from 397 million tonnes in 2022, with tight supplies of LNG constraining growth while maintaining prices and price volatility above historic averages. Demand for natural gas has already peaked in some regions but continues to rise globally, with LNG demand expected to reach around 625-685 million tonnes a year in 2040, according to the latest industry estimates.
“China is likely to dominate LNG demand growth this decade as its industry seeks to cut carbon emissions by switching from coal to gas,” said Steve Hill, Executive Vice President for Shell Energy. “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."
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. However, countries in South Asia and South-east Asia would need significant investments in gas import infrastructure.
The Shell LNG Outlook 2024 shows that gas complements wind and solar power in countries with high levels of renewables in their power generation mix, providing short-term flexibility and long-term security of supply.
European energy security
LNG continued to play a vital role in European energy security in 2023, following a slump in Russian pipeline exports to Europe in 2022, with new regasification facilities helping to improve security of energy supplies. European LNG imports remained at similar levels to 2022, despite an overall decline in European gas demand in 2023.
Relatively mild winter temperatures in countries that rely on gas for heating, combined with high gas storage levels, stronger nuclear power generation and a modest economic recovery in China, all helped balance the global gas market in 2023.
This helped bring down and stabilise 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. 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.
To view Shell’s LNG Outlook 2024, visit http://www.shell.com/lngoutlook
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In brief
Shell’s LNG Outlook 2024 estimates that global LNG demand could exceed 50% growth by 2040, with China’s industrial shift from coal to gas and rising energy needs in South and South-east Asia identified as major drivers. The report puts global LNG trade at 404 million tonnes in 2023, compared with 397 million tonnes in 2022, and says limited supply growth kept the market structurally tight. Shell says Europe’s LNG imports were similar to 2022 levels, even as European gas demand declined. It also reports that milder winter weather, high storage, stronger nuclear generation and a modest Chinese recovery helped ease gas prices and volatility in Europe and East Asia during 2023. The company says gas can complement wind and solar by providing flexibility and supply security.
Key takeaways
- Shell estimates global LNG demand could grow by more than 50% by 2040.
- The report cites China’s coal-to-gas shift and energy demand in South and South-east Asia as growth drivers.
- Global LNG trade reached 404 million tonnes in 2023, up from 397 million tonnes in 2022.
- Shell says Europe’s LNG imports stayed near 2022 levels despite lower overall gas demand.
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Questions around this news
What factors are expected to drive global LNG demand growth through 2040?
The outlook cited in the release points to industrial coal-to-gas switching in China and rising fuel needs in South Asia and South-east Asia as key drivers. It estimates that global LNG demand could reach around 625–685 million tonnes a year in 2040, with declining domestic gas production in parts of the two Asian regions potentially increasing their need for imports.
How did LNG support European energy security in 2023?
The release says LNG continued to support European energy security after Russian pipeline exports to Europe fell in 2022. New regasification facilities helped strengthen supply security, while European LNG imports stayed near their 2022 level even as overall gas demand declined in 2023. The release also notes that storage levels and other market conditions helped ease pressure on gas prices.
What does regasification mean in the LNG supply chain?
Regasification is the process of converting liquefied natural gas back into gas after it arrives at an import terminal. The gas can then enter pipelines and be delivered to power plants, industrial users, or other customers. Import terminals typically store LNG and use equipment to warm it until it returns to a gaseous state.
How can natural gas complement wind and solar power?
Natural gas-fired power plants can adjust their output to help balance electricity supply when wind or solar generation varies. They may provide short-term flexibility, while their availability can also contribute to longer-term reliability. The role of gas in a power system depends on factors such as infrastructure, generation mix, and how the system is operated.
