Europe's rising demand for liquefied natural gas (LNG) is expected to increase competition with Asia for the limited amount of new supply available over the next two years, and may eventually dominate LNG trading, according to Shell’s LNG Outlook 2023 released Thursday.
Following Russia's invasion of Ukraine, European nations, including the UK, were able to survive a decline in pipeline gas imports by importing 121 million tonnes of LNG in 2022, an increase of 60% from 2021, the company explained.
South Asian consumers cut back on their purchases, resulting in a 15 million-tonne drop in Chinese imports, which helped European nations secure enough gas to avoid shortages.
The rapidly expanding demand for LNG in Europe drove prices up to all-time highs, causing turbulence in global energy markets.
With LNG becoming an increasingly important pillar of European energy security and a long-term solution for increasing gas needs amid reduced Russian pipeline gas, EU countries have decided to develop new regasification terminals in north-western Europe.
Shell emphasized China's evolving role in energy markets, citing the country's ability to balance the global LNG market as a rapidly growing importer.
'The war in Ukraine has had far-reaching impacts on energy security around the world and caused structural shifts in the market that are likely to impact the global LNG industry over the long term,' Steve Hill, Shell’s executive vice president for energy marketing, was quoted as saying in the report.
Hill stressed that the Ukraine war underscored the need for a more strategic approach toward longer-term contracts to secure reliable supply and avoid exposure to price spikes.
To counteract the decline in Russian pipeline gas supplies, governments in Europe attempted to strengthen energy security and shield their economies from high prices by prioritizing LNG imports and quickly establishing new import facilities.
Europe’s rising LNG demand forced other buyers to reduce their imports and switch to other fuels, generating more emissions. High global LNG prices led to a drop in LNG imports in South Asia, with Pakistan and Bangladesh importing more fuel oil to minimize power supply shortages and India using more coal.
While total global LNG trade reached 397 million metric tons in 2022, industry experts predict that by 2040, LNG demand will exceed 700 million metric tons per year.
Shell stressed the need for more investment in liquefaction projects to avoid a supply-demand gap that is expected to emerge by the late 2020s.
By Sibel Morrow
Anadolu Agency
energy@aa.com.tr