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Shell calls for more LNG supply-side investment on looming demand gap

Highlights

LNG trade rose 6% to 380 mil mt in 2021

China now world's largest LNG importer

US set to become world's biggest exporter in 2022

Shell on Feb. 21 called for an increase in investment in LNG supply in order to meet rising LNG demand, especially in Asia, as it warned that an LNG supply-demand gap was set to emerge in the mid 2020s.

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In its annual LNG market outlook, Shell said global LNG trade in 2021 rose by 6% year on year to 380 million mt in 2021 as many countries rebounded from the economic impact of the pandemic.

It said rising LNG demand, combined with supply constraints, caused gas and LNG prices to remain volatile throughout the year.

"The volatility emphasizes the need for a more strategic approach to secure reliable and flexible gas supply in [the] future to avoid exposure to price spikes," Shell said.

"An LNG supply-demand gap is forecast to emerge in the mid-2020s and focuses attention on the need for more investment to increase supply and meet rising LNG demand, especially in Asia," it said.

In 2021, the US led export growth with a year-on-year increase of 24 million mt, Shell said.

The US, it said, is "expected to become the world's largest LNG exporter in 2022" with the addition of more liquefaction capacity.

Shell said China and South Korea led the growth in LNG demand in 2021. "China increased its LNG imports by 12 million mt to 79 million mt, surpassing Japan to become the world's largest LNG importer."

Overall, global LNG demand is expected to cross 700 million mt/year by 2040, a 90% increase on 2021 demand, Shell said.

"Asia is expected to consume the majority of this growth as domestic gas production declines, regional economies grow and LNG replaces higher-emissions energy sources," it said.

Shell added that LNG had a "key role" to play to further the use of renewable energy and as a backup in the event of intermittent supply.

Brazil, for example, tripled its imports of LNG to over 7 millon mt in 2021 as persistent dry weather led to weaker hydropower generation.