Shell LNG Outlook: Global Demand Growth to Keep Pace with Supply

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Written by Paul Wiseman for Industrial Info Resources (Sugar Land, Texas)--Even as natural gas prices slump in the U.S., worldwide energy powerhouse Shell plc (NYSE:SHEL) (London, England) sees global demand growth for liquefied natural gas (LNG) keeping pace with supply increases over the next few years. Shell recently released its LNG Outlook 2024, with key observations about the global importance of natural gas as a necessary supply for industry, heating and a baseline power grid fuel. Here are some top takeaways.

U.S., Australia, Qatar Top LNG Exporters
Global LNG trade reached 404 million metric tons last year, with three nations accounting for more than half that supply. The U.S., Australia and Qatar all exported at least 80 million metric tons, with the U.S. hitting 86 million metric tons, adding up to almost 250 million metric tons.

Asia, particularly Southeast Asia, is becoming a major destination for U.S. LNG, although shipping routes varied across the year due to the impact of drought on the Panama Canal and increasing dangers near the Suez Canal. In July, most U.S. LNG went through one of the two canals, but by December most of it was finding alternate--and longer--routes.

For 2024, Shell expects the destination trends to continue.

Worldwide Demand Rises, but Patterns Shift
China led the globe in the amount of LNG import increases last year at 7.9 million metric tons year-over-year, while its neighbor Japan led the world in import decreases, at -6.0 million metric tons. Shell notes that China's LNG import growth outpaced its small economic improvement. Japan's import drop was largely due to the restart of several nuclear facilities that had been shut down in the wake of the 2011 tsunami. Although still only a little more than half the pre-tsunami level, nuclear power generation hit its highest point since that incident last year.

Others dropping in LNG imports were, from highest to lowest, the U.K., France and Spain, among others. Import increases were seen in Germany, the Netherlands and Thailand (in that order) among others. Shell said it believes that Europe will still need more LNG going forward, even as the report sees overall demand falling in that region.

LNG's Importance as a Baseline
Even with the growth of renewables, natural gas and coal are seen as vital to keeping the lights on around the world. That's due to intermittent wind and solar, which dominate the renewable growth market. In light of this dependence on gas, Shell pointed out that over the last three years, long-term sale and purchase agreements (SPAs) have risen, averaging about 70 million metric tons per annum from 2021 to 2023. In the five years before that, most years were at or below 25 million metric tons except 2019, in which new SPAs exceeded 40 million metric tons.

Industrial Info's Natural Gas Products and Senior Energy Analyst Maria T. Sanchez agreed with the understanding of the importance of natural gas as a baseline, saying, "Natural gas continues to be the most reliable and cost competitive source for power generation."

Long-Term Supply and Demand Growth Expected
While saying that LNG demand has already peaked in some markets, Shell is looking for significant growth worldwide between now and 2040. China, with demand expansion expected to exceed 50% from today's levels by 2040, will lead the way.

On the supply side, the report says North America is expected to provide about 30% of supply growth over that period, with a caution about getting that gas to LNG and markets. A concern is that most of that gas will come from limited regions, meaning new pipeline construction will be vital. The Appalachian, Permian and Haynesville combined for 76.7 million cubic feet per day in December according to Statista, accounting for more than 77% of all U.S. production.

Supply growth also will be contingent on U.S. Henry Hub prices increasing soon, or development of new pure-gas resources will suffer, likely dropping in production. Only in gas-as-a-second-product areas like the Permian Basin will production increase without more price incentives.

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 trillion (USD).