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article imageLNG shortages possible by mid-2020s without new investments

By Karen Graham     Feb 26, 2018 in Business
More than $200 billion of investment in liquefied natural gas (LNG) is needed to meet a boom in demand by 2030, Royal Dutch Shell, the world’s top LNG trader, said on Monday.
The British-Dutch oil giant's 2018 LNG Outlook reported that LNG continued to defy expectations, growing by 29 million tons in 2017, about 30 percent more than previously expected, according to CNBC.
Shell's LNG OUTLOOK 2018 found that since the start of the century, the number of countries importing LNG has quadrupled, while the number of countries supplying LNG has almost doubled. LNG trade increased from 100 million tons in 2000 to nearly 300 million tons in 2017.
The increase has been boosted by rising demand from Asian markets. "In Asia alone, demand rose by 17 million tons. That's nearly as much as Indonesia, the world's fifth-largest LNG exporter, produced in 2017," Maarten Wetselaar, Shell's director for integrated gas and new energies, said.
Russia's gigantic Yamal LNG plant in Arctic Siberia is one of the most ambitious such projects ...
Russia's gigantic Yamal LNG plant in Arctic Siberia is one of the most ambitious such projects in the world
KIRILL KUDRYAVTSEV, AFP/File
While Japan continues to be the world's largest importer of LNG, China has surpassed South Korea to become the world's second-biggest importer of LNG.
The good news is that LNG demand is expected to grow from 293 million tons per year in 2017 to around 500 million tons per year by 2030. And Shell adds that a huge amount of new LNG capacity is expected to come online in the next few years, including the U.S., where five LNG export terminals are expected to start up by the end of 2019.
Shell is ringing the alarm bells
But the report points out there is a "mismatch in requirements between buyers and suppliers," and this is growing. And while most suppliers want long-term sales to secure investments, most LNG buyers are looking for "shorter, smaller and more flexible contracts so they can better compete in their own downstream power and gas markets."
Shell says this mismatch between suppliers and buyers needs to be resolved. These spot deliveries of LNG, or shipments made on an as-needed basis, increased 17 percent in 2017 to an all-time high 1,100 cargoes.
LNG carrier (LNG tanker) AL KHAZNAH.National Gas Shipping Company (NGSCO) IMO: 9038440 Flag: Liberia...
LNG carrier (LNG tanker) AL KHAZNAH.National Gas Shipping Company (NGSCO) IMO: 9038440,Flag: Liberia.at Tokyo Bay (Uraga Channel) Japan.October 8,2012
YouTube
Using short-term contracts to take advantage of fluctuating prices does allow some countries to establish LNG trading hubs, and the rise in the number of these hubs is expected to increase liquidity and transparency in pricing, which could be a good thing. However, in the interim, the mismatch between suppliers and buyers threatens to inject uncertainty into the industry.
Basically, Shell is saying we could very well see suppliers holding off on approving investments in new facilities. The cost of developing the required capacity is roughly $1 billion per million tons of LNG per year, Wetselaar said.
That does not include investments in the development of the gas fields associated with LNG plants, he told reporters.
Petronas will invest $16 billion in a liquefied natural gas (LNG)  facility in B.C. Photo shows Petr...
Petronas will invest $16 billion in a liquefied natural gas (LNG) facility in B.C. Photo shows Petronas facility in Cove Point, Maryland
Petronas
And while Shell has forecast the demand for LNG rising to around 500 million tons per year by 2030, supplies are seen slipping to 300 mtpa due to a lack of new projects and natural declines in existing production. And this is very worrisome as long as investment in new facilities and gas fields lags.
“The industry is still looking at quite a challenge to build supplies to meet demand in the 2020s,” he said. And as for the future outlook, Shell sees growth in LNG shipments coming primarily from Australia, the world's largest exporter after Qatar, and the United States.
More about Shell, Lng, Shortages, 2020s, Investment
 
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