Page 6 - GLNG Week 08 2021

GLNG COMMENTARY GLNG

Shell: Asia to drive LNG demand

as it almost doubles

Royal Dutch Shell’s annual LNG outlook shows that demand for the fuel was resilient last year
despite the pandemic, and further growth is expected

PERFORMANCE ROYAL Dutch Shell has predicted that global when used to generate electricity. As a result,
LNG demand will hit 700mn tonnes by 2040, it views gas and LNG as having a “central” role
WHAT: almost doubling from current levels. The to play in the global energy supply as more
Shell expects LNG super-major, which released its annual LNG and more countries adopt net-zero emissions
demand to almost double market outlook this week, anticipates that Asia targets.
from current levels by will drive nearly 75% of LNG demand growth, Shell anticipates that more than half of future
2040. as domestic production in the region declines LNG demand will come from countries with
but gas continues to displace higher-emission net-zero emissions targets. “The LNG industry
WHY: sources of energy. will need to innovate at every stage of the value
LNG demand proved chain to lower emissions and play a key role in
resilient last year and the Resilience powering hard-to-abate sectors,” it said.
fuel is expected to play an Shell’s outlook said that global LNG trade rose The countries adopting these net-zero targets
important role as more slightly in 2020 to 360mn tonnes, compared include South Korea and Japan, which Shell
countries decarbonise. with 358mn tonnes in 2019. The increase came highlighted because they are also the leading
despite the “unprecedented” volatility caused by importers of LNG, along with China. Indeed,
WHAT NEXT: the coronavirus (COVID-19) pandemic, which South Korea is aiming to switch 24 coal-fired
Shell anticipates that Asia led to a brief collapse in demand as countries power plants to cleaner-burning LNG by 2034
will drive nearly 75% of around the world went into lockdown in an in an effort to help meet its target.
LNG demand growth. effort to contain the spread of the virus. Looking at other trends over the past year,
“Though marginal, the increase in volume Shell noted that European demand, alongside
reflects the resilience and flexibility of the global flexible US supply, helped balance the LNG
LNG market in 2020, a year which saw losses to market in the first half of 2020 as the world grap-
global GDP of several trillion dollars as econ- pled with the pandemic and its impacts. How-
omies large and small struggled to contain the ever, the dynamics changed towards the end of
COVID-19 outbreak,” Shell commented. 2020, with supply outages elsewhere, structural
Following the first wave of the pandemic, constraints and colder-than-expected winter
and the lockdowns that came with it, China weather leading to LNG price spikes in Asia.
and India led the recovery in LNG demand. Shell noted that while global LNG prices had
Shell said China increased its LNG imports by fallen to a record low early last year, they ended
7mn tonnes to 67mn tonnes in 2020 – an 11% 2020 at a six-year high.
increase year on year. Indian LNG imports also
rose by 11% over the course of 2020 as the coun- Supply warning
try took advantage of lower-priced LNG to sup- Looking ahead to the years between now and
plement its domestic production of gas. 2040, Shell warned that a supply-demand gap
was expected to open up in the mid-2020s, with
Decarbonisation less new LNG production entering the market
The super-major anticipates that Chinese than had previously been anticipated. This is not
demand will keep rising, spurred by the coun- surprising given that a number of developers
try’s adoption of carbon neutrality by 2060, deferred final investment decisions (FIDs) last
owing to the role gas can play in decarbonisation year as COVID-19 caused LNG demand and
while more polluting fuels are still being used. prices to crash. Some projects have even been
The company noted that China’s heavy-duty cancelled outright. As a result, just 3mn tonnes in
transport sector alone consumed nearly 13mn new LNG production capacity was announced
tonnes of LNG in 2020, almost doubling from in 2020, down from a projected 60mn tonnes,
2018, to serve a rapidly growing fleet of over according to Shell.
500,000 LNG-fuelled trucks and buses. This could well be rectified this year, with a
Indeed, Shell asserted that gas emits 45-55% number of projects poised to reach FID. How-
fewer greenhouse gas (GHG) emissions and less ever, a brief supply shortfall in the medium term
than one-tenth of the air pollutants than coal is still expected to materialise.™

P6 www. NEWSBASE .com Week 08 26•February•2021