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The growth in demand for liquefied natural gas (LNG) can lead to a global shortage if corrective measures are not undertaken, according to Shell’s annual LNG Outlook 2018.
The report said: “The global LNG market has continued to defy expectations of many market observers, with demand growing by 29 million tonnes to 293 mt in 2017.”
“Shell sees potential for a supply shortage developing in mid-2020s, unless new LNG production project commitments are made soon,” the report added.
Maarten Wetselaar, Integrated Gas and New Energies Director at Shell, said: “We are still seeing significant demand from traditional importers in Asia and Europe, but we are also seeing LNG provide flexible, reliable and cleaner energy supply for other countries around the world.”
Things are far worse for India and China’s air quality by 2035, going by Shell’s expectations . According to the report, there is an incremental energy demand of more than 600 thousand tonne of oil equivalent expected in both countries from 2017-2035. Due to high dependence on coal, for more than 75 per cent of the total incremental demand, the air quality index reports extremely poor conditions for the two countries.
According to Shell, LNG buyers continue to sign shorter and smaller contracts. In 2017, the number of LNG spot cargoes sold reached 1,100 for the first time, equivalent to three cargoes delivered every day. This growth mostly came from new supply from Australia and the USA.
This has led to the mismatch in requirements between buyers and suppliers growing. Most suppliers still seek long-term LNG sales to secure financing. But LNG buyers increasingly want shorter, smaller and more flexible contracts so they can better compete in their own downstream power and gas markets, the report said.
Shell said, “This mismatch needs to be resolved to enable LNG project developers to make final investment decisions that are needed to ensure there is enough future supply of this cleaner-burning fuel for the world economy.”
Japan remained the world’s largest LNG importer in 2017, while China moved into the second place as Chinese imports surged past South Korea’s. Total demand for LNG in China reached 38 million tonnes, a result of continued economic growth and policies to reduce local air pollution through coal-to-gas switching, the report added.
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