According to Shell’s annual LNG forecast, demand for that raw material will shoot up as economies recover. We are seeing stable demand for LNG in 2020 despite the COVID-19 pandemic. The forecast shows that global trade in liquefied natural gas (LNG) increased to 360 million tonnes in 2020. This is enough to power 725 million households. For comparison, it was only 358 million tonnes in 2019. The growth has not been hampered by the exceptional market volatility caused by the restrictions imposed worldwide due to COVID-19.

The increase in volumes, although minimal, reflects the resilience and flexibility of the global LNG market in 2020 – a period when global GDP fell by several trillion dollars as economies struggled to cope with the pandemic. Global LNG prices were at a record low at the start of the year, but by the end of the 12-month period had reached their highest level in six years thanks to a resumption of demand in Asia and an increase in winter purchases on the back of reduced supplies.

Natural gas emits 45% to 55% less greenhouse gases and less than a tenth of air pollution than coal when used to generate electricity.

China and India played a major role in rebuilding demand for LNG after the pandemic outbreak. China upped LNG imports by 7 million tonnes to 67 million tonnes, an 11 per cent increase for the year.

The announcement of a move towards carbon neutrality by 2060 should further boost Chinese LNG demand as gas plays a crucial role in decarbonising carbon-challenged sectors such as buildings, heavy industry, shipping and heavy road transport.

India increased imports by 11% in 2020, taking advantage of plummeting LNG prices to supplement domestic LNG production.

Asia’s two other large LNG importers – Japan and South Korea – have also announced net zero emission targets in 2020. To meet its target, South Korea plans to convert 24 coal-fired power plants to cleaner-burning LNG by 2034.

Demand in Europe and flexible supply from the US helped balance the global LNG market in the first half of 2020. However, supply disruptions in other regions, structural constraints and extreme weather conditions towards the end of the year led to higher prices.

Global LNG demand will reach 700 million tonnes by 2040. Asia is expected to generate nearly 75 per cent of this growth as domestic gas production declines and LNG replaces higher-emitting energy sources, concerns mounting over air quality and compliance with emissions targets. China’s heavy transport sector, for example, consumed nearly 13 million tonnes of LNG in 2020 – almost double the 2018 figure – to support a rapidly growing fleet of LNG trucks and buses that far exceeds 500,000 vehicles. LNG use in maritime transport is also growing. The number of ships powered by it is expected to more than double, and the number of LNG bunkering vessels worldwide is expected to reach 45 by 2023.

As demand increases, a mismatch between supply and demand can be expected in the middle of this decade, as new production will be lower than previously assumed levels. Only 3 million tonnes of new LNG production has been announced for 2020, down from the expected 60 million tonnes.

Estimates suggest that more than half of future LNG demand will come from countries with net zero emission targets. The LNG industry will need to innovate at every stage of the value chain to reduce emissions and play a key role in powering sectors where decarbonization is difficult.

By Annie Cook (photo: Shell)