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 LNG trade: Truths and predictions
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.
At a glance
#1 Industry, heating and emerging Asia to drive LNG demand growth
- Demand for natural gas has peaked in some regions and globally is set to peak after 2040.
- The global LNG market will continue growing into the 2040s, mostly driven by China’s industrial decarbonisation and strengthening demand in other Asian countries.
#2 Gas prices more stable in 2023 but volatility lingered in a tight market
- Global trade in LNG expanded slightly in 2023, with tight supplies constraining growth and prices staying above historic averages.
- A milder winter, high gas storage levels, modest economic recovery in China and lower demand in Europe helped balance the global gas market during 2023.
#3 Rising global demand for LNG expected to keep pace with new supply
- In the medium term, latent demand for LNG – especially in Asia – is set to consume new supply that is expected to come onto the market in the second half of the 2020s.
- To offset falling domestic gas production in South-east Asia, significant infrastructure investment will be needed to access the LNG that these countries need for their economic development.
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.
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.
… said Steve Hill, Executive Vice President for Shell Energy
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.
European energy security
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.
