More commitments on liquefied natural gas (LNG) production projects must be made to avoid a potential supply shortage in the mid-2020s.
That’s according to Shell’s latest annual LNG Outlook, which suggests while investment is picking up – with 2018 seeing final investment decisions on 21 million tonnes of new capacity compared to seven million tonnes over the last two years – it still expects supplies to tighten.
It finds demand for LNG globally rose by 27 million to 319 million tonnes last year and is expected to increase further, reaching around 384 million tonnes in 2020.
The report suggests ongoing efforts to improve urban air quality saw China’s imports surge by 16 million tonnes in 2018 – up by 40% from 2017.
The average length of contracts signed more than doubled from around six years in 2017 to 13 years last year while the total contracted volume also more than doubled to almost 600 million tonnes in 2018.
On the supply side, Australian LNG exports caught up with long-time leading supplier Qatar towards the end of last year and are expected to increase by 10 million tonnes in 2019.
Around 35 million tonnes of additional supply are expected this year, with the growth forecast to be absorbed by Europe and Asia, where countries are replacing coal-fired power and heating with gas as part of their efforts to improve air quality.
Maarten Wetselaar, Integrated Gas and New Energies Director at Shell said: “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.
“We saw Asian LNG demand growth exceed expectations again in 2018 and we expect this strong growth to continue. Investment in new supply projects is picking up but more will be needs soon.”