According to Shell’s LNG Outlook 2024, global demand for liquefied natural gas (LNG) is poised to escalate by over 50% by 2040, driven by the increasing adoption of natural gas in industrial applications in China, as well as burgeoning economic development in South Asia and South-east Asia.
Trade in LNG surged to 404 million tonnes in 2023, marking a slight increase from the previous year’s 397 million tonnes.
However, tight supplies of LNG have constrained growth, sustaining prices and price volatility above historic averages. Despite some regions witnessing a peak in natural gas demand, global demand is anticipated to rise steadily, with projections estimating LNG demand to reach approximately 625-685 million tonnes annually by 2040.
Steve Hill, Executive Vice President for Shell Energy, underscores China’s pivotal role in driving LNG demand growth in the coming decade, particularly as the nation aims to reduce carbon emissions by transitioning from coal to gas.
The imperative to tackle carbon emissions and local air pollution is propelling China’s shift towards gas, especially in sectors like steel production, which accounts for significant emissions.
In the subsequent decade, declining domestic gas production in parts of South Asia and South-east Asia is anticipated to trigger a surge in LNG demand as these regions increasingly rely on fuel for gas-fired power plants and industrial applications. However, meeting this demand will necessitate substantial investments in gas import infrastructure.
The report also highlights the complementary role of gas alongside renewable energy sources like wind and solar power, providing both short-term flexibility and long-term supply security.
In Europe, LNG played a critical role in ensuring energy security, particularly in the wake of decreased Russian pipeline exports in 2022. Despite stable LNG imports in 2023, gas prices and volatility remained higher compared to pre-2021 levels, owing to the structural tightness in the global gas market.
