LNG sector rebounds in 2021 amid tight supply, volatile prices

The ever-increasing demand for liquefied natural gas, coupled with tight supply, has led to continuous fluctuations in the price of natural gas and liquefied natural gas throughout the year. Natural gas prices hit record highs in October 2021 as European LNG inventory levels were at historically low levels and it was difficult to secure supplies to meet its expected winter gas demand.

Volatility in natural gas prices underscores the need for a more strategic approach to securing future reliable, flexible gas supplies to avoid price spikes. The LNG supply-demand gap is expected to emerge by the mid-2020s, requiring more investment to increase supply and meet growing LNG demand, especially from Asia.

Wael Sawan, director of Shell's integrated gas, renewables and energy solutions business, said: "Last year has shown that gas and LNG are delivering to communities as the world recovers from the hardships caused by the COVID-19 pandemic. The energy aspect it requires plays a crucial role."

“As countries continue to develop lower-carbon energy systems and pursue net-zero emissions targets, the focus on cleaner gas and measures to decarbonize the gas industry will help LNG continue to be a reliable, flexible energy source for decades to come. energy."

Exports of LNG have increased in 2021 even as some unexpected outages have sapped LNG deliveries. The United States led the overall export growth with a year-on-year increase of 24 million tons and is expected to become the world's largest LNG exporter in 2022.

China and South Korea will lead the growth of LNG demand in 2021. China's LNG imports rose by 12 million tonnes to 79 million tonnes, surpassing Japan as the world's largest LNG importer.

In 2021, Chinese LNG buyers signed long-term contracts of more than 20 million tons per year. This shows that liquefied natural gas will continue to play a role in the transition from coal to gas in key industries and in helping China achieve its 2060 carbon neutrality goal.

Overall, global LNG demand is projected to exceed 700 million tonnes per year by 2040, a 90% increase from 2021 demand. Asia is expected to consume most of the increase as indigenous natural gas production declines, regional economies grow, and liquefied natural gas displaces higher-emitting energy sources, helping it address air quality issues and boost its carbon reduction goals.

Liquefied natural gas plays a key role in promoting the use of renewable energy and can be used as a backup energy source in the event of its intermittent supply. Brazil, for example, tripled its LNG imports to more than 7 million tonnes in 2021 due to lower hydropower production due to persistent dry weather.

Effectively reducing natural gas emissions and developing cleaner energy pathways will further strengthen the above-mentioned role of natural gas. In 2021, a number of investments in emission reduction will be announced, and the decarbonization of the LNG value chain will become a trend.