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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

COMMENTARY ROYAL Dutch Shell has predicted that global pollutants than coal when used to generate
LNG demand will hit 700mn tonnes by 2040, electricity. As a result, it views gas and LNG
almost doubling from current levels. The as having a “central” role to play in the global
WHAT: super-major, which released its annual LNG energy supply as more and more countries
Shell expects LNG market outlook this week, anticipates that Asia adopt net-zero emissions targets.
demand to almost double will drive nearly 75% of LNG demand growth, Shell anticipates that more than half of future
from current levels by as domestic production in the region declines LNG demand will come from countries with
2040. but gas continues to displace higher-emission net-zero emissions targets. “The LNG industry
sources of energy. will need to innovate at every stage of the value
WHY: chain to lower emissions and play a key role in
LNG demand proved Resilience powering hard-to-abate sectors,” it said.
resilient last year and the Shell’s outlook said that global LNG trade rose The countries adopting these net-zero tar-
fuel is expected to play an slightly in 2020 to 360mn tonnes, compared gets include South Korea and Japan, which Shell
important role as more with 358mn tonnes in 2019. The increase came highlighted because they are also the leading
countries decarbonise. despite the “unprecedented” volatility caused by importers of LNG, along with China. Indeed,
the coronavirus (COVID-19) pandemic, which South Korea is aiming to switch 24 coal-fired
WHAT NEXT: led to a brief collapse in demand as countries power plants to cleaner-burning LNG by 2034
Shell anticipates that Asia around the world went into lockdown in an in an effort to help meet its target.
will drive nearly 75% of effort to contain the spread of the virus. Looking at other trends over the past year,
LNG demand growth. “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 mar-
LNG market in 2020, a year which saw losses to ket in the first half of 2020 as the world grappled
global GDP of several trillion dollars as econ- with the pandemic and its impacts. However, the
omies large and small struggled to contain the dynamics changed towards the end of 2020, with
COVID-19 outbreak,” Shell commented. supply outages elsewhere, structural constraints
Following the first wave of the pandemic, and colder-than-expected winter weather lead-
and the lockdowns that came with it, China and ing to LNG price spikes in Asia.
India led the recovery in LNG demand. Shell said Shell noted that while global LNG prices had
China increased its LNG imports by 7mn tonnes fallen to a record low early last year, they ended
to 67mn tonnes in 2020 – an 11% increase year 2020 at a six-year high.
on year. Indian LNG imports also rose by 11%
over the course of 2020 as the country took Supply warning
advantage of lower-priced LNG to supplement Looking ahead to the years between now and
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 number of projects poised to reach FID. How-
45-55% fewer greenhouse gas (GHG) emis- ever, a brief supply shortfall in the medium term
sions and less than one-tenth of the air is still expected to materialise.™

P4 www. NEWSBASE .com Week 09 04•March•2021