Shell expects global LNG demand to rise by 11% in 2019, China leads

The global LNG demand is expected to increases by 11% in 2019 to 354 million tons (Mt), up 11% from 319 Mt from 2018, with China taking the lead. Both Europe and Asia are expected to absorb all this additional supply, according to Shell's latest annual LNG Outlook.

Strong demand for cleaner-burning fuel in Asia continued to drive rapid growth in liquefied natural gas (LNG) use in 2018, with global demand rising by 27 million tonnes to 319 million tonnes. Shell expects demand to reach about 384 million tonnes in 2020.

A rebound in new long-term LNG contracting in 2018 could revive investment in liquefaction projects. Based on current demand projections, Shell still expects supplies to tighten in mid-2020s.

Ongoing efforts to improve urban air quality saw China's imports of LNG surge by 16 million tonnes in 2018, up by 40% from 2017.

On the supply side, Australian LNG exports caught up with those of long-time leading supplier Qatar towards the end of 2018 and are expected to rise by 10 million tonnes in 2019.

Both countries are well-positioned to supply rapidly developing economies across Asia with gas they need to improve air quality by displacing coal-fired power and heating.

"The continued surge in Chinese LNG imports has helped improve air quality in some of its biggest cities over the last few years. China's success in making the air cleaner for millions of people shows the critical role that natural gas can play in providing more and cleaner energy to the world," said Maarten Wetselaar, Integrated Gas and New Energies Director at Shell.

"We saw Asian LNG demand growth exceed expectations again in 2018 and we expect this strong growth to continue. Investment in new supply projects is picking up, but more will be needed soon."

LNG has played an important role in the global energy system over the last few decades, as an increasing number of countries have turned to natural gas to meet their growing energy needs. LNG trade increased from 100 million tonnes in 2000 to 319 million tonnes in 2018.

New long-term contracts may spur investment New LNG projects typically require long-term sales agreements to secure financing. From 2014 through 2017, LNG buyers had increasingly been looking to sign shorter, smaller and more flexible contracts.

Shell warned in its 2018 LNG Outlook that this mismatch between suppliers and buyer needs would have to be resolved to enable developers to go ahead with new projects.

Encouragingly for the long-term health of the global LNG market, the average length of contracts signed more than doubled from around 6 years in 2017 to about 13 years in 2018. Meanwhile, the total contracted volume more than doubled to almost 600 million tonnes in 2018.

COMENTARY:

The chosen article talks about the prospects for LNG sales for 2019. Natural gas is one of the most important energy sources on the planet. LNG is used as fuel in industries, heavy vehicles, and regular cars. Among the benefits generated by the use of liquefied natural gas is the ease of storage, its combustion releases fewer polluting gases, it is very energetic, beneficial, in addition to being cheaper than alcohol and gasoline. The demand for LNG has grown in the world, as it is necessary to use sustainable energy in the world. The demand for Liquefied Natural gas had an increase from 27 million tons to a total of 315 million tons. The expectations for 2019 are an increase in the demand by 35 million tons, having Europe and Asia as the continents expected to absorb the extra supply. Shell expects the demand to reach 384 million tons in 2020. The projections for the future made by Shell also tell us that demand for LNG will increase between 2019-2025, and then in the middle of the '20s, supply will tighten. China is the biggest importer of LNG due to their concerns about air quality. The imports in China increased by around 40%. LGN trade was measured globally from 100 million tons in 2000 to 319 tons in 2018. Countries such as Bangladesh, Panama, and Gibraltar have already chosen LNG to meet their growing energy needs.

There are economic terms that are relevant for the understanding of the article such as: Microeconomics (The study of the behavior of individual markets), utility (Advantage that an individual derives from the consumption of a good or service), potential growth (the increase in the quality of the factors of production), scarcity (limited availability of economic resources in relation to the unlimited demand for goods and services), demand (the total amount of goods and services that consumers are willing and able to purchase at a given price in a given time period) and supply ( is the total amount of goods and services that producers are willing and able to purchase at a given price in a given time period).

Figure 1 - graph showing the expected increase in demand and supply of LNG in 2019

The graph above shows the supply and demand curve for LNG. Because LNG is a substitute good for coal, its supply and demand have increased a lot over the past years, and because the change in demand is expected to be parallel to change in supply, the Equilibrium Price is expected to remain the same. There was a significant increase in demand for LNG; It went from 27 million tonnes in 2000 to 315 million tonnes in 2018. An increase of 1.066,6%, so it describes the change in the demand curve. The supply curve changed proportionally to the demand curve. The reason is that the more demand, more supply is necessary.

The central question of the article is: what is better, LNG or coal? Natural gas is a less carbon-intensive source of energy for power generation than coal. It can back up solar and wind power production by picking up the load when the sun goes behind a cloud or stopping generation when the wind starts blowing. The main problem with Natural Gas is that extraction, processing, and shipping the gas in liquid form is an emissions-intensive exercise. Low-income countries face the challenge of increasing energy supply without having a significant environmental impact. In this regard, LNG is a better option than coal. Both are emitters of Greenhouse Gases, LNG still cleaner than coal, and for low-income countries trying to increase access to electricity, heating, and personal transportation, it may be the better alternative than coal.

Concerning greenhouse gas variables, an LNG supply chain emits more greenhouse gases than, for example, a duct gas supply chain, mainly due to extra processing steps for transporting LNG. This difference is much slower when LNG is compared to remote pipeline deliveries. In most cases, the difference in greenhouse gas performance is less than the difference in energy savings, primarily due to the inevitable methane leaks from products. In general, LNG is not precisely what you might call an ecologically acceptable fuel.

BIBLIOGRAPHY:

https://politicsofpoverty.oxfamamerica.org/2019/08/natural-gas-coal-climate-developing-countries/

https://interestingenergyfacts.blogspot.com/2009/08/lng-advantages-and-disadvantages.html

https://www.shell.com/energy-and-innovation/natural-gas/liquefied-natural-gas-lng/lng-outlook-2019.html

https://www.rambuenergy.com/2019/03/shell-expects-global-lng-demand-to-rise-by-11-in-2019-china-leads/