APPEC: Global LNG demand seen surging 50% from current levels by 2040: Gunvor

Global LNG demand could rise 50% from the current levels by 2040 if prices don’t ratchet as consumption is seen staying stronger, Gunvor Group co-founder and Chairman Torbjörn Törnqvist told S&P Global Commodity Insights Sept. 9.

“We’re seeing a bit of a more normal market from the price point of view compared to what the situation was when Russia attacked Ukraine,” Törnqvist said at Commodity Insights’ Asia Pacific Petroleum Conference, or APPEC, 2024.

International spot LNG prices reached record highs in March 2022 following Russia’s invasion of Ukraine. Meanwhile, Asian spot prices also jumped to an all-time high of $84.762/MMBtu March 7, 2022, Commodity Insights data showed.

Törnqvist observed change in trade flows as more LNG came from the Middle East, Africa, and the US to Europe. “There was only one way out of that [unprecedented high prices], and that was that the demand had to come down in both Europe and Asia, because that gas was replaced by LNG."

The Platts JKM averaged $33.98/MMBtu in 2022, surging from $18.60/MMBtu in 2021, according to Commodity Insights data. The Platts JKM for October was assessed at $13.12/MMBtu on Sept. 9.

Törnqvist noted that the US LNG exports are swing destined. “Whatever happens in Europe will be reflected in Asia and vice versa,” he said.

According to Törnqvist, presently LNG markets are quite “finely balanced” and “there is no real cushion anywhere” because some projects are expected to come onstream only by 2026 while consumption continues to be supported by countries such as India and China.

The situation with the sanctioning of the Russian Arctic 2 project also clearly has an impact on the outlook, he said.

Currently, the market is witnessing the shoulder season, meaning the summer heat has passed and it is getting into a period where demand naturally goes down. Stocks have also rebuilt and are quite high in Europe, but they have not rejuvenated as fast as last year, Törnqvist said.

“If everything is fine and nothing happens, prices will float around the level $12-$14/MMBtu level,” Törnqvist said.

“However, winter is approaching, and a cold winter would lead to price spikes… So, we may see a tight market,” he added.

Meeting demand, growth plans

In April, Commodity Insights reported that Bangladesh planned to import a total of 24 cargoes from Gunvor Singapore in the next two years until its new long-term LNG contracts that start from 2026 kick in.

Gunvor continues to work with Bangladesh, Törnqvist said. “Bangladesh needs to continue importing LNG, regardless,” he replied when asked about how the current political situation in the South Asian nation may affect Gunvor’s trade there.

In addition, the company also continues to actively participate in tenders to supply LNG to Southeast Asian markets, Törnqvist said.

Gunvor is among the world’s largest independent commodities trading houses by turnover, and it generated a turnover of $127 billion on volumes of 177 million mt in 2023, according to a company statement. The company is also committed to cut scope 1 and scope 2 emissions by 40% by 2025.

LNG and LNG infrastructure is a key driver of Gunvor’s growth, Törnqvist said.

“So, we are building out the very strong logistical platform. It's natural that we are also looking for capacity, if we find the right thing,” he said, referring to Gunvor’s plans to invest in upstream assets.

LNG’s prospects as a bunker fuel

While energy transition is facing uncertainty, LNG as a marine fuel has a very strong future simply because the shipping industry hasn’t found any scalable alternative although there is a lot of hype around what can be done, Törnqvist said.

“We see some ideas and then start assessing from a cost point of view, if it is possible and how is legislation shaping up…In such a situation, LNG as a marine fuel will continue to play a substantial role because if you want to from fuel oil, you probably can’t do it without LNG,” he said.

The LNG bunkering market had become a “bit quiet and was even dismissed” when prices rose dramatically because of the Russia-Ukraine situation. Now that prices are softer, demand for LNG bunker fuel is coming back again, Törnqvist added.

LNG as a marine fuel could even account for as much as 50% of the total bunker fuel mix by 2040, he estimated.

“It takes time to convert ships and ships that we bring into the market today will still likely be there until 2040 and beyond,” he said.