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Shell plc SHEL recently reported its 2025 LNG outlook, which states that the demand for liquefied natural gas (LNG) is expected to rise by 60% by 2040, with Asia at the forefront of this growth.
Shell anticipates that the world will need more gas for power generation, heating and cooling, industry and transport to meet development goals and LNG will continue to be the preferred choice because of its reliability, flexibility and adaptability to meet growing global energy demand. According to the company, the LNG demand will reach 630-718 million tons/year by 2040, highlighting an upward trend as compared to the previous estimates.
The huge boost in LNG demand highlights its crucial role in bridging the energy gap for developing economies while supporting decarbonization goals.
Reasons for LNG Demand Boost
The shoot-up in LNG demand through the next decade and a half can primarily be attributed to economic expansion in Asia, emission-reduction efforts in heavy industry, transportation, and the growing impact of artificial intelligence.
Countries like China and India are expanding their gas infrastructure to meet surging energy needs while reducing carbon emissions. China is rapidly increasing its LNG import capacity and enhancing its pipeline network to connect 150 million more people by 2030. Similarly, India plans to extend gas access to 30 million additional consumers over the next five years.
Since LNG is a cost-effective option for shipping and road transport that reduces emissions, the marine sector is making a quick shift to LNG adoption by increasing the number of LNG-powered vessels and is also expecting to drive annual LNG demand to more than 16 million tons by 2030, marking a 60% increase from previous forecasts.
In Europe, the LNG demand will remain critical through 2030, helping it to repurpose the existing gas infrastructure and import bio-LNG, synthetic LNG, or even green hydrogen.
2024 Market Dynamics
2024 saw the smallest annual growth in LNG trade, which expanded by just 2 million tons, reaching only 407 million tons. The limited new supply development was the primary cause of the slowdown in LNG trade growth in 2024, accompanied by the geopolitical tension between Russia and Ukraine leading to the expiration of Russian pipeline gas flows that further tightened the market, pushing the prices up.
During the first half of 2024, the LNG prices dropped to their lowest level since 2022, but the prices bounced back by mid-year because the supply capacity could not keep up with the rising demand. Taking advantage of the lower prices in the first half, China imported 79 million tons and India’s imports scaled up to 27 million tons, a 20% year-on-year increase driven by stronger power needs amid hot summer conditions.