Asian LNG demand recovery set to continue in 2021: Shell

London — Asian LNG demand is expected to continue to recover from the impact of the coronavirus pandemic in 2021, Shell said in its latest annual LNG outlook published Feb. 25.

In the outlook, Shell also warned that a lack of final investment decisions last year for new liquefaction capacity would lead to a supply-demand gap in the mid-2020s.

Global LNG trade increased to 360 million mt in 2020 from 358 million mt the previous year, Shell said, despite the "unprecedented volatility" caused by the pandemic.

"LNG provided flexible energy during the pandemic, demonstrating its resilience," Shell's head of integrated gas, Maarten Wetselaar, said in a statement.

"The industry reacted swiftly to changing market conditions, diverting cargoes to shifting demand centers and through adjusting supply," Shell said.

Much of Asia saw its LNG demand fall back during the early stages of the pandemic between February and May, but demand bounced back strongly in the second half of the year.

China and India led the recovery in demand for LNG following the outbreak of the pandemic, Shell said, with China increasing its LNG imports last year by 11% to 67 million mt.

India also increased imports by 11% in 2020 as it took advantage of lower-priced LNG to supplement its domestic gas production, it said.

"Asian LNG demand recovery [is] projected to continue in 2021," Shell said in the outlook, pointing to an estimate of increased demand of up to around 19 million mt.

Elsewhere, Shell sees demand mostly flat, with estimates of either limited growth or a slight fall in consumption across Europe, the Americas and the Middle East and Africa.

Supply gap

The pandemic also took its toll on new project approvals in 2020, Shell said.

It said just 3 million mt/year of new LNG production capacity was announced in 2020, down from an expected 60 million mt/year.

Just one liquefaction project -- Sempra Energy's Energia Costa Azul export project in Mexico -- reached FID in 2020.

"As demand grows, a supply-demand gap is expected to open in the middle of the current decade with less new production coming on stream than previously projected," Shell said.

Further out, LNG demand is estimated to hit 700 million mt/year by 2040, almost double current rates.

Asia, Shell said, is expected to drive nearly 75% of this growth as domestic gas production declines and LNG substitutes higher emission energy sources.

"For instance, China's heavy-duty transport sector consumed nearly 13 million mt of LNG in 2020, almost doubling from 2018, to serve the fast-growing fleet of well over 500,000 LNG-fueled trucks and buses," Shell said.

"LNG-fueled shipping is also growing, with the number of vessels expected to more than double and global LNG bunkering vessels set to reach 45 by 2023."