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The significantly higher demand for liquefied natural gas in Europe is set to intensify competition with Asia in the short term and to dominate LNG trade in the longer term, Shell said in its annual LNG outlook on Thursday.
European countries, including the UK, saw their LNG imports jump by 60% last year, to 121 million tons, Shell, the world’s largest LNG trader, said as it issued a bullish outlook on the fuel through 2040.
Global LNG trade hit 396 million tons last year, an increase of 16 million tons compared to 2021.
The surge in Europe’s imports in 2022 was facilitated by a 15-million-ton, or 19%, decline in China’s imports due to the zero-Covid policy, and a marked drop in South Asia’s LNG imports due to the high prices, Shell said.
At the same time, Europe’s pipeline gas imports from Russia slumped by 53% in 2022 compared to 2021.
“The war in Ukraine has had far-reaching impacts on energy security around the world and caused structural shifts in the market that are likely to impact the global LNG industry over the long term,” Steve Hill, Shell’s Executive Vice President for Energy Marketing, said in a statement.
LNG could become a core energy supply for Europe to meet energy security needs, while China could increasingly provide more flexibility to the global LNG market, the supermajor said.
Through the mid-2020s, that is over the next two years, the global LNG market will remain tight as Europe and Asia compete for limited new LNG supply, the supermajor said.
New supply – especially from Qatar and the United States – is set to hit the market in 2025-2026. Around 80% of new LNG supply by 2030 will come from those two major LNG exporters, Shell noted.
However, the supermajor warned that another supply-demand gap could be looming in the late 2020s without new investment in additional supply.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.