Strong demand for cleaner-burning fuel in Asia continued to drive rapid growth in liquefied natural gas (LNG) use in 2018, with global demand rising by 27 million tonnes to 319 million tonnes, according to Shell’s latest annual LNG Outlook.
Shell said last Friday that it expected demand to reach about 384 million tonnes in 2020. According to the company, global LNG supply is set to rise by 35 million tonnes in 2019. Europe and Asia are expected to absorb all this additional supply. A rebound in new long-term LNG contracting in 2018 could revive investment in liquefaction projects. Based on current demand projections, Shell still expects supplies to tighten in the mid-2020s.
The company added in its LNG Outlook that ongoing efforts to improve urban air quality saw China’s imports of the chilled fuel surge by 16 million tonnes in 2018, up by 40 percent from 2017.
On the supply side, Australian LNG exports caught up with those of long-time leading supplier Qatar towards the end of 2018 and are expected to rise by 10 million tonnes in 2019.
Both countries are well-positioned to supply rapidly developing economies across Asia with gas they need to improve air quality by displacing coal-fired power and heating. Shell also stated that LNG played an important role in the global energy system over the last few decades with LNG trade increasing from 100 million tonnes in 2000 to 319 million tonnes in 2018.
Shell said that new LNG projects typically require long-term sales agreements to secure financing. From 2014 through 2017, LNG buyers looked to sign shorter, smaller, and more flexible contracts. The company warned in its 2018 LNG Outlook that this mismatch would have to be resolved if developers were to go ahead with new projects.
Fortunately, the average length of contracts signed more than doubled from around six years in 2017 to about 13 years in 2018 while the total contracted volume rose to 600 million tonnes in 2018.