Though marginal, the increase in volume reflects the
resilience and flexibility of the global LNG market in 2020, a year which saw
losses to global GDP of several trillion dollars as economies large and small
struggled to contain the COVID-19 outbreak. Demand in 2019 stood at 358 million
tonnes.
Global LNG prices hit a record low early in the year but
ended the 12-month period at a six-year high as demand in parts of Asia
recovered and winter buying increased against tightened supply.
“LNG provided flexible energy which the world needed during
the COVID-19 pandemic, demonstrating its resilience and ability to power
people’s lives in these unprecedented times,” said Maarten Wetselaar,
Integrated Gas, Renewables and Energy Solutions Director at Shell.
“Around the world countries and companies, including Shell,
are adopting net-zero emissions targets and seeking to create lower-carbon
energy systems. As the cleanest-burning fossil fuel, natural gas and LNG have a
central role to play in delivering the energy the world needs and helping power
progress towards these targets.”
Natural gas emits between 45% and 55% fewer greenhouse gas
emissions and less than one-tenth of the air pollutants than coal when used to
generate electricity.
Demand rebounds in Asia
China and India led the recovery in demand for LNG following
the outbreak of the pandemic. China increased its LNG imports by 7 million
tonnes to 67 million tonnes, an 11% increase for the year.
China’s announcement of a target to become carbon neutral by
2060 is expected to continue driving up its LNG demand through the key role gas
can play in decarbonising hard-to-abate sectors, namely buildings, heavy
industry, shipping and heavy-duty road transport.
India increased imports by 11% in 2020 as it took advantage
of lower-priced LNG to supplement its domestic gas production.
Two other major Asian LNG-importing countries – Japan and
South Korea – also announced net-zero emissions targets in 2020. To meet its
net-zero target, South Korea aims to switch 24 coal-fired power plants to
cleaner-burning LNG by 2034.
Demand in Europe, alongside flexible US supply, helped to
balance the global LNG market in the first half of 2020. However, supply
outages in other basins, structural constraints and extreme weather later in
the year resulted in higher prices.
LNG market to 2040
Overall, global LNG demand is estimated to hit 700 million
tonnes by 2040. Asia is expected to drive nearly 75% of this growth as domestic
gas production declines and LNG substitutes higher emission energy sources,
tackling air quality concerns and meeting emissions targets.
For instance, China’s heavy-duty transport sector consumed
nearly 13 million tonnes of LNG in 2020, almost doubling from 2018, to serve
the fast-growing fleet of well over 500,000 LNG-fuelled trucks and buses.
LNG-fuelled shipping is also growing, with the number of vessels expected to
more than double and global LNG bunkering vessels set to reach 45 by 2023.
As demand grows, a supply-demand gap is expected to open in
the middle of the current decade with less new production coming on-stream than
previously projected. Just 3 million tonnes in new LNG production capacity was
announced in 2020, down from an expected 60 million tonnes.
According to estimates, more than half of future LNG demand
will come from countries with net-zero emissions targets. The LNG industry will
need to innovate at every stage of the value chain to lower emissions and play
a key role in powering hard-to-abate sectors.
View Shell’s LNG Outlook 2021 at www.shell.com/lngoutlook
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