Europe's increased LNG demand to intensify competition with Asia: Shell

Europe's increased need for LNG looks set to intensify competition with Asia for limited new supply available over the next two years and may dominate LNG trade over the longer term, Shell said Feb. 16 in its LNG Outlook.

With reduced Russian pipeline gas, LNG is becoming an "increasingly important pillar" of European energy security, Shell said, supported by the rapid development of new regasification terminals in northwest Europe.

"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, said.

"It has also underscored the need for a more strategic approach -- through longer-term contracts -- to secure reliable supply to avoid exposure to price spikes," Hill said.

European gas prices hit record highs last summer on Russian gas supply curtailments and strong gas demand for storage injection.

Platts, part of S&P Global Commodity Insights, assessed the benchmark Dutch TTF month-ahead price at an all-time high of Eur319.98/MWh on Aug. 26.

Prices have weakened since on the back of healthy storage and demand curtailments with Platts assessing the TTF month-ahead price on Feb. 14 at Eur54.38/MWh.

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China role

Shell said European countries, including the UK, imported 121 million mt of LNG in 2022, an increase of 60% compared with 2021.

A 15 million mt fall in Chinese imports combined with reduced imports by South Asian buyers helped European countries to secure enough gas and avoid shortages, it said.

China, Shell said, was evolving "from being a rapidly growing import market to playing a more flexible role with an increased ability to balance the global LNG market."

Total global trade in LNG reached 397 million mt in 2022, with industry forecasts expecting LNG demand to reach between 650 million mt/year and more than 700 million mt/year by 2040.

"More investment in liquefaction projects is required to avoid a supply-demand gap that is expected to emerge by the late 2020s," Shell said.