The global trade in liquefied natural gas (LNG) increased 6 percent to 380 million tons during 2021 as many countries rebounded from the economic impact of the COVID-19 pandemic, according to Shell’s latest annual LNG Outlook.
Rising LNG demand, combined with supply constraints, caused gas and LNG prices to remain volatile throughout the year. Prices reached record levels in October 2021 as Europe, with historically low storage levels, struggled to secure LNG cargoes to meet expected winter gas demand.
The volatility emphasizes the need for a more strategic approach to secure reliable and flexible gas supply in future to avoid exposure to price spikes. An LNG supply-demand gap is forecast to emerge in the mid-2020s and focuses attention on the need for more investment to increase supply and meet rising LNG demand, especially in Asia.
“As countries develop lower-carbon energy systems and pursue net-zero emissions goals, focusing on cleaner forms of gas and decarbonisation measures will help LNG to remain a reliable and flexible energy source for decades to come,” said Wael Sawan, Integrated Gas, Renewables and Energy Solutions Director at Shell.
LNG exports grew in 2021 despite unexpected outages that dented LNG available for delivery. The USA led export growth with a year-on-year increase of 24 million tons and is expected to become the world’s largest LNG exporter in 2022.
China and South Korea led the growth in LNG demand in 2021. China increased its LNG imports by 12 million tons to 79 million tons, surpassing Japan to become the world’s largest LNG importer.
Chinese LNG buyers signed long-term contracts for more than 20 million tons a year, signaling an ongoing role for LNG in coal-to-gas switching in powering key sectors and helping to reach its ambition to be carbon neutral by 2060.
Global LNG demand is expected to cross 700 million tons a year by 2040, a 90 percent increase on 2021 demand. Asia is expected to consume the majority of this growth as domestic gas production declines, regional economies grow and LNG replaces higher-emissions energy sources, helping to tackle concerns over air quality and to help progress towards carbon emissions targets.
Brazil tripled imports of LNG during 2021 – to over 7 million tons – as persistent dry weather led to weaker hydropower generation.