Asian LNG demand continues to exceed expectations


Asian LNG demand continues to exceed expectations

DOHA:  Strong 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 27 million tonnes to 319 million 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. Both 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. Based on current demand projections, Shell still expects supplies to tighten in mid-2020s. Ongoing efforts to improve urban air quality saw China’s imports of LNG surge by 16 million tonnes in 2018, up by 40 percent from 2017.

The Shell LNG Outlook for 2019 noted Asian LNG imports exceeded expectations again in 2018 absorbing continued supply growth. China became the world’s largest gas importer, with LNG imports doubling over two years. JKM futures trading volume increased ten-fold since 2016. JKM Futures is a monthly cash settled future based on the Platts daily assessment price for the LNG Japan/Korea Marker (JKM).

Gas sector’s near term supply growth is expected to be absorbed by Europe and Asia. With expecting an additional 35MT supply in 2019, these markets will see the continued investments in supply to meet long-term demand growth. Asia has significant potential to take more LNG volumes. China and India can double their import infrastructure in 5 years.

New countries are increasingly choosing LNG for various benefits. For instance, in Bangladesh, natural gas meets over half of total energy demand. With declining domestic gas production, LNG is meeting existing and new gas demands.

Panama is replacing oil-fired power generation and the strategic location of Panama Canal offers opportunities for LNG bunkering. Economic and environmental benefits are increasing the use of LNG in road transport. China’s heavy-duty transport are fast transforming into LNG-fuelled. Europe is also moving to LNG fuelled heavy-duty transport. An estimated 280,000 LNG trucks are expected to hit the roads in Europe by 2030. Co-financed by EU, BioLNG EuroNet is building 39 LNG stations, 2000 LNG trucks and a BioLNG production plant in Europe.

European power sector is also capable of absorbing more LNG. In addition, Europe will need more imports to offset declining domestic gas production.

Marine LNG is also poised for a growth. World’s first LNG powered cruise ship set sail in the fourth quarter of 2018. Public Gas Corp of Greece signed a grant agreement with EU for construction of the first LNG bunkering vessel in the Q4. The first quarter of 2018 witnessed the delivery of the world’s first LNG-fuelled bulk carrier charter and the third quarter saw ordering of the first Japanese LNG bunker vessel.

B 2070, the world is likely to be using at least 50 percent more energy than it does today as population grows and people seek to improve their quality of life. According to the International Energy Agency (IEA), renewable generation is expected to underpin the growth of electricity from 18 percent to 50 percent of energy supply by 2050. The remaining energy demand that is difficult to electrify will still require cleaner solutions.

Gas and renewable are expected to play a critical role in meeting the energy challenge. Government policies being implemented encouraging a cleaner energy mix. South Korean taxes are to favour gas over coal and EU carbon pricing is supported by policy changes.

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