Asia seen driving 75% of LNG demand growth by 2040: Shell LNG outlook

Significant demand-supply gap seen opening in middle of current decade; China and India led LNG demand growth in 2020

Asian countries are expected to drive most of the demand for Liquefied Natural Gas (LNG) by 2040 according to Shell’s LNG Outlook 2021.

“Overall, global LNG demand is estimated to hit 700 million tonnes by 2040. Asia is expected to drive nearly 75 per cent of this growth as domestic gas production declines and LNG substitutes higher emission energy sources, tackling air quality concerns and meeting emissions targets,” the outlook said.

Demand-supply gap anticipated

According to the outlook, 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 3 million tonnes in new LNG production capacity was announced in 2020, down from an expected 60 million tonnes,” the outlook said.

This may result in more expensive LNG prices, as was seen in early 2021 when spot LNG prices climbed to record highs.

More than half of future LNG demand will come from countries with net-zero emissions targets, the outlook estimated.

Asian LNG demand to rise significantly

“China’s announcement of a target to become carbon neutral by 2060 is expected to continue driving up its LNG demand through the key role gas can play in decarbonising hard-to-abate sectors, namely buildings, heavy industry, shipping and heavy-duty road transport," the outlook said.

"Two other major Asian LNG-importing countries – Japan and South Korea – also announced net-zero emissions targets in 2020. To meet its net-zero target, South Korea aims to switch 24 coal-fired power plants to cleaner-burning LNG by 2034,” the outlook added.

India-China drove demand in 2020

Reflecting on the year gone by, the report said that China and India had led the recovery in demand for LNG following the outbreak of the pandemic.

China increased its LNG imports by 7 million tonnes to 67 million tonnes, an 11 per cent increase for the year. India increased imports by 11 per cent in 2020 as it took advantage of lower-priced LNG to supplement its domestic gas production.

Globally, the demand in Europe, alongside flexible US supply, helped to balance the LNG market in the first half of 2020. However, supply outages in other basins, structural constraints and extreme weather later in the year resulted in higher prices.