Shell: Need for cleaner air driving LNG demand growth

shell lng 25fStrong demand for cleaner-burning fuel in Asia continued to drive rapid growth in liquefied natural gas (LNG) use in 2018, with global demand rising by 27mn tonnes to 319mn tonnes, according to Shell’s latest annual LNG Outlook

Shell expects demand to reach about 384 million tonnes in 2020.

Global LNG supply is set to rise by 35 million tonnes in 2019. Europe and Asia are expected to absorb all this additional supply. A rebound in new long-term LNG contracting in 2018 could revive investment in liquefaction projects.

Ongoing efforts to improve urban air quality saw China’s imports of LNG surge by 16mn tonnes in 2018, up by 40 per cent from 2017.

“The continued surge in Chinese LNG imports has helped improve air quality in some of its biggest cities over the last few years. China’s success in making the air cleaner for millions of people shows the critical role that natural gas can play in providing more and cleaner energy around the world,” said Maarten Wetselaar, director for integrated gas and new energies at Shell.

LNG has played an important role in the global energy system over the last few decades, as an increasing number of countries have turned to natural gas to meet their growing energy needs.

LNG trade increased from 100mn tonnes in 2000 to 319mn tonnes in 2018, according to the outlook.

Long-term contracts may spur investment

New LNG projects typically require long-term sales agreements to secure financing. From 2014 through 2017, LNG buyers had increasingly been looking to sign shorter, smaller and more flexible contracts. Shell warned in its 2018 LNG Outlook that this mismatch between suppliers and buyer needs would have to be resolved to enable developers to go ahead with new projects.

Encouragingly for the long-term health of the global LNG market, the average length of contracts signed more than doubled from around six years in 2017 to about 13 years in 2018. Meanwhile, the total contracted volume more than doubled to almost 600mn tonnes in 2018.

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