The fortunes of U.S. LNG export projects over the coming decade will be tied to rising demand centers in Asia beyond the traditional buyers, according to a new outlook from the shipbroker Poten & Partners.
Poten projected global demand for LNG will increase 40% from 2020 to 2031, with emerging markets in Southeast Asia such as Vietnam, the Philippines and Myanmar representing sources of rapid demand growth. Southeast Asian demand is expected to increase from about 15 million tonnes per year in 2020 to nearly 60 Mt/y in 2031, accounting for about 44% of total Asian demand growth, the shipbroker said.
"The ability of this region's demand to increase is really important to the global market balance, and all the projects looking to take [final investment decisions] in this period are going to help facilitate the growth in those countries," Poten's LNG forecasting manager, Kristen Holmquist, said during a May 26 webinar, referring to final investment decisions on advancing new projects to construction.
China and India are still expected to be major sources of demand growth, increasing by more than 40 Mt/y combined by 2031, Poten said. But demand growth in the rest of the world will be close to 90 Mt/y over the same period. Outside of Asia, Poten projected Europe will continue to play an important role as a swing demand center, but that regional demand will fall from recent highs and flatten, while demand growth in the Middle East will be modest. In the Americas, the shipbroker projected Brazil would dominate demand growth.
Poten estimated global LNG demand would reach 500 Mt/y by 2031. That compared to an estimated demand in 2020 of 360 Mt/y, according to an outlook released in February by Royal Dutch Shell PLC, which also pointed to developing countries in Asia as a critical driver of gas demand growth.
Meeting that level of demand growth means new LNG export projects will need to be commercially sanctioned by developers, Holmquist said. But Poten said there would only be room for a limited number of highly competitive projects in the world over the next decade, with many of the more than 170-Mt/y worth of proposed projects that have not advanced to construction likely to fall off the board. Poten estimated roughly 70 Mt/y of new capacity will need to be built beyond the 123 Mt/y that is already under construction. The projection included estimates that depleting gas reserves would see LNG output decline in some countries such as Malaysia, Indonesia, Trinidad and Tobago, and the United Arab Emirates.
More than a dozen LNG developers in North America are competing to advance their projects to construction amid a strong rebound in LNG demand. Some developers in recent months have pointed to a growing interest among world LNG buyers in long-term contracts as a reason for optimism.
"We do expect a lot of the capacity that hasn't started construction yet to come from the U.S., just given the large number of projects that are planned for the U.S.," Holmquist said. "There's going to be a lot of projects that are likely not to get built."
Poten's forecast also reflected an LNG market that is supplied by an increasingly concentrated group of suppliers. The top five producers by 2031 — Qatar, the U.S., Australia, Russia and Mozambique — could account for 74% of LNG supplies, according to the forecast. If unrest in Mozambique prevents planned LNG export projects from advancing, then it is likely more projects from the U.S. would get built, Holmquist said. Otherwise, Mozambique's LNG exports could reach about 30.5 Mt/y in 2031, or about 6% of global supply, according to Poten.
"This concentration of supply among producers is actually really rare in the commodity markets," Holmquist said.
