Strong Demand for LNG Expected to Continue

Posted by PortVision

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According to the LNG Outlook recently published by Shell, things look good for solid growth in the liquefied natural gas industry through 2030, though some indicators in 2016 briefly called that projection into question.

Many expected that the large increase in new LNG supplies last year—most notably from Australia— would outpace demand. But several factors prevented that from happening, including:

  • Higher than expected demand from China and India
  • The addition of six new LNG importing countries: Columbia, Egypt, Jamaica, Jordan, Pakistan, and Poland

Commenting on that turn of events, Maarten Wetselaar, Integrated Gas and New Energies Director at Shell, said, “Global LNG trade demonstrated its flexibility time and again in 2016, responding to shortfalls in national and regional gas supply and to new emerging demand.”

Based on that trend, Wetselaar said, “LNG demand is set to grow at twice the rate of gas demand, at 4 to 5% a year” from now through 2030.

Additional factors affecting LNG growth

In spite of competition from renewable energy sources like wind and solar, the global LNG market is expected to remain bullish. And Shell isn’t alone in this assessment. Solomon Associates, a provider of advisory services to the global energy industry, predicts that “global liquefication capacity could reach 85 billion cubic feet per day in 2025, up from 41 bcfd in 2016.” Future demand, it’s predicted, will be driven by:

  • Governmental policies
  • Floating storage regasification units
  • A region’s need to replace its declining gas production
  • The ability of the LNG trade to meet the evolving needs of buyers, including short-term and lower-volume buyers

LNG in the big picture of things

For countries attempting to grow economically while still addressing environmental concerns, the ability of natural gas to partner with renewables makes it an attractive energy option. When the sun doesn’t shine or the wind doesn’t blow, natural gas can be counted on to provide reliable power.

And in certain industries, natural gas typically emerges as the energy source of choice. In high-temperature applications, like steel production, gas is more effective than electricity. And for heating needs, it’s cleaner than coal.

But it’s the transport sector, including the shipping industry, that’s expected to play a super-sized role in LNG growth.

LNG and the shipping industry

Recognizing the environmental benefits of natural gas, global governments have created policies that are favorable to the demand for it. It’s been reported that the sulphur specification for fuel oil in the shipping industry, for instance, is set to reduce from 3.5% sulphur to just .5% by 2020.

“That means that the current shipping brokering of choice today, fuel oil, will no longer be an option without technological changes to the shipping and the introduction of bunkers and introduction of scubbers,” said Steve Hill, Shell's Executive Vice-President for the company’s gas and energy marketing trading arm. “Therefore, to meet new specifications, ship owners will need to look at alternative fuels, such as diesel, low-sulphur fuel oil, and LNG. And that clearly makes LNG more competitive in that space.”

In summary, economic, environmental, and policy indicators point in the direction of growth in the decades ahead for the LNG industry.

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Posted on Apr 25, 2017 6:07:00 AM

Topics: Tankers, LNG, Shipping