Shell calls for new investments to avoid potential LNG supply shortage

Shell has urged companies to make significant investments in new liquefied natural gas (LNG) production projects to thwart a potential supply shortage in mid-2020s.

Based on projections made by the company in its annual outlook, the demand for LNG will be driven by Asian markets.

Last year, Japan took pole position in terms of LNG import, with China following in second place.

Chinese demand for LNG reached 38 million tonnes in the wake of continued economic growth and policies implemented by the government to tackle the menace of air pollution by replacing coal with cleaner sources of energy such as LNG.

Meanwhile, global LNG demand registered a growth of 29 million tonnes to 293 million tonnes last year.

Shell integrated gas and new energies director Maarten Wetselaar said: “We are still seeing significant demand from traditional importers in Asia and Europe, but we are also seeing LNG provide flexible, reliable and cleaner energy supply for other countries around the world.

“In Asia alone, demand rose by 17 million tonnes. That’s nearly as much as Indonesia, the world’s fifth-largest LNG exporter, produced in 2017.”

The lack of parity in the demand-supply scenario can be explained from the fact that since 2000, the number of countries importing LNG and those supplying it increased in the proportion of 4:2.

Globally, LNG trade witnessed a threefold increase from 100 million tonnes in 2000 to around 300 million tonnes last year.

The markets have been bolstered by new supply from projects in Australia and the US.

Shell highlighted the growing inconsistency in requirements between buyers and suppliers, with buyers favouring shorter, smaller and more flexible contracts, and suppliers seeking long-term LNG sales to secure financing.

The company urged for a speedy resolution to the issue in order to enable LNG project developers to make final investment decisions.