UK energy supermajor Shell has projected that liquefied natural gas (LNG) will replace coal as a leading driver of Chinese and other Asian economies.
According to the firm’s LNG Outlook published today, demand will rise by 50 per cent by 2040 and global LNG trade will grow to around 625-685m tonnes per year, up from the 404m tonnes traded in 2023.
“China is likely to dominate LNG demand growth this decade as its industry seeks to cut carbon emissions by switching from coal to gas,” said Steve Hill, executive vice president for Shell Energy.
“With China’s coal-based steel sector accounting for more emissions than the total emissions of the UK, Germany and Turkey combined, gas has an essential role to play in tackling one of the world’s biggest sources of carbon emissions and local air pollution.”
The firm also noted that declining domestic gas production in parts of South Asia and South-east Asia could drive a surge in demand for LNG and its required infrastructure.
Shell is coming off big wins in the LNG space in the fourth quarter of its blockbuster 2023 earnings period, with the sector’s gains offsetting impairment charges in the chemicals division.
“Shell’s LNG division continues to help support cash generation and the company also appears to have operational momentum,” RBC Capital Markets analyst Biraj Borkhataria said in a recent note.
In an interview last week, the company’s chief executive Wael Sawan also recently hit out at U.S. president Joe Biden for what he deemed constraining behaviour on the sector.
“I don’t think the recent announcement by the administration necessarily impacts, in the short or medium term, the supply of LNG, but I do think it erodes confidence in the longer term,” Wael Sawan said of president Biden’s decision to pause new deals on LNG exports from the U.S.
Another narrative running underneath Shell’s LNG operations and long-term outlook is its ongoing dispute with U.S. LNG exporter Venture Global.
Shell and fellow UK petrogiant BP argue that they are contractually owed huge LNG cargoes from the self-styled ‘disruptor’ of hydrocarbons, which for its own part claims the contracts are not yet valid.
Shell has previously alleged Venture Global’s actions are a “wilful breach of contract” – a long-term LNG agreement -and have allowed the company to reap an $18bn (£14.2bn) windfall because of a surge in gas prices following Russia’s 2022 invasion of Ukraine.