Despite global liquefied natural gas (LNG) supplies growing by only 3 mtpa last year—the lowest annual increase in a decade—a new report from Shell predicts demand will rise to between 630 and 718 mtpa by 2040, a 60% increase above current levels.
According to Shell’s annual LNG outlook published this week, economic growth in Asia is a key driver behind the projected surge in demand. As the continent—and other parts of the world—continue adopting cleaner fuels, the supermajor expects more than 170 mtpa of new LNG supply to be available by 2030.
LNG is increasingly considered an attractive source of energy due to its cost-effectiveness and its ability to lower emissions in shipping, road transport, and hard-to-electrify industrial sectors, according to the London-based oil and gas company.
Longer term, Shell said that existing gas infrastructure around the globe could be repurposed to import bio-LNG, synthetic LNG, and green hydrogen.
But the report also notes that investments are lagging in comparison with energy diversification ambitions, particularly in Europe and Japan which must step up LNG imports in the coming years to meet emissions goals.
China is also depending on LNG to meet increasing domestic energy needs by building out more import capacity and adding piped gas connections to supply 150 million people by 2030. India is progressing at a slower pace but plans to build new infrastructure to connect 30 million people to gas lines over the next 5 years.
"Upgraded forecasts show that the world will need more gas for power generation, heating and cooling, industry and transport to meet development and decarbonization goals,” Tom Summers, senior vice president for Shell LNG marketing and trading, said in a statement. "LNG will continue to be a fuel of choice because it’s a reliable, flexible, and adaptable way to meet growing global energy demand."
Looking Back At 2024
Global LNG shipments reached 407 mpta in 2024, marking a year-over-year increase of only 3 mpta. Shell said construction delays and declines in domestic gas production in key exporting countries, including Nigeria, Malaysia, and Russia, limited supply growth.
The Middle East led long-term LNG contracting in 2024, while the US, already the world's largest LNG exporter, continued expanding its capacity to account for one-third of global supply despite increasing regulatory scrutiny and emissions concerns.
Early 2024 saw LNG prices fall to their lowest level since 2022, but prices bounced back by midyear due to delays in the development of new supply capacity.
In the first half of 2024, demand for LNG in Asia strengthened as China took advantage of lower prices, importing 79 mtpa last year. Imports in India also grew, increasing 20% to 27 mtpa, as the country bought record volumes to help meet greater power demand due to hotter weather in early summer.
While LNG continued to play a vital role in European energy security in 2024, imports fell by 23 mtpa, due to strong renewable energy generation and a limited recovery in industrial gas demand. However, the expiration of Russian pipeline gas contracts to Europe via Ukraine, coupled with cold winter temperatures and low wind power generation at the end of the year, drove strong storage withdrawals that increased prices.
LNG supply growth is coming, but Shell noted that the timelines of newly proposed LNG projects remain uncertain due to multiple developmental challenges, including geopolitical tensions, regulatory hurdles, startup risks, and supply chain bottlenecks. Despite these concerns, Shell's research suggests growth is inevitable, with China, India, and Europe all showing strong demand signals.
