China, which in 2023 overtook Japan to reclaim its status as the world’s top LNG importer, will continue to drive global LNG demand.

LONDON/SINGAPORE (Feb 14): Global demand for liquefied natural gas (LNG) is estimated to rise by more than 50% by 2040, as China and countries in South and Southeast Asia use LNG to support their economic growth, Shell said in an annual report on Wednesday.

Global LNG trading rose by 1.8% to 404 million metric tonnes in 2023, Shell, the world's largest LNG trader, said in its 2024 annual LNG outlook.

It also said prices and price volatility were above historic averages, constraining economic growth, and that the market was still "structurally right" because of the reduction in Russian supplies to Europe following the Ukraine war and limited supply growth.

Although demand for natural gas has peaked in some regions, it continues to rise globally, and is expected to reach around 625-685 million tonnes per year in 2040 according to the latest industry estimates, the report said.

The report said that China, which in 2023 overtook Japan to reclaim its status as the world's top LNG importer, will continue to drive global LNG demand.

"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," he added.

China dominance

China's 2024 LNG imports are expected to rebound to nearly 80 million tonnes, from about 70 million tonnes in 2023, according to ICIS and Rystad forecasts, surpassing 2021's record 78.79 million tonnes.

Over the following decade, declining domestic gas production in parts of South Asia and Southeast Asia could drive a surge in demand for LNG as these economies need fuel for gas-fired power plants or industry.

Shell's report predicted a balance between rising demand and new supply, but said significant investments would be needed in gas import infrastructure.

"In the medium term, latent demand for LNG — especially in Asia — is set to consume new supply that is expected to come on to the market in the second half of the 2020s," Shell’s report said.

As supplies were ample last year as the world market recovered from the major disruption linked to the onset of the Ukraine war in 2022, prices have eased.

Asian spot prices LNG-AS averaged around US$18 per million British thermal units (mmBtu) in 2023, easing from an all-time high of US$70/mmBtu in 2022.

Prices fell further this year and remain below US$10/mmBtu, encouraging buyers from China to Bangladesh to lock in new term supplies from Qatar and the US.