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Shell: LNG supply could be facing shortage in mid-2020s

27 Feb 2018

The supply of liquefied natural gas (LNG) could be in shortage around the middle of 2020 due to rising market demand in Asia and Europe, says the LNG Outlook for 2018 report from oil major Shell.

“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,” said Maarten Wetselaar, Integrated Gas and New Energies Director at Shell.

“In Asia alone, demand rose by 17 million tonnes. That’s nearly as much as Indonesia, the world’s fifth-largest LNG exporter, produced in 2017.”

According to Shell, Japan remained the world’s largest LNG importer in 2017, while China moved into 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.

On top of being an alternative fuel for vessels, LNG has played an increasing role in the global energy system over the last few decades.

Since 2000, the number of countries importing LNG has quadrupled and the number of countries supplying it has almost doubled. LNG trade increased from 100 million metric tonnes (mt) in 2000 to nearly 300 million tonnes in 2017.

LNG buyers continued 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.

“The mismatch in requirements between buyers and suppliers is growing. Most suppliers still seek long-term LNG sales to secure financing,” explains Shell.

“But LNG buyers increasingly want shorter, smaller and more flexible contracts so they can better compete in their own downstream power and gas markets.

“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.”

Photo credit: Shell
Published: 27 February, 2018
 

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