"(In the European gas market) demand is lower today which is helpful, but the next winter might be much colder...and there is the potential that there will be more competition for those LNG volumes particularly from China as it comes out of its lockdown," said Steve Hill, Shell's executive vice president for energy marketing.
"The faster the growth in Chinese economic demand and therefore in the LNG demand, the tighter the market will be."
Gas prices hit new highs last year, pushing Asian spot LNG prices to follow suit as they hit record highs near $70.5 per million British thermal units (mmBtu).
Prices, however, are down more than 70% from those highs. "In the near term, the global LNG market is expected to remain tight and exposed to supply and demand shocks, with limited new supply coming online. More investment in supply will be needed to meet future LNG demand," Shell said in the report. While LNG is becoming an increasingly important pillar of European energy security, supported by the rapid development of new regasification terminals in north-west Europe, China, by contrast, is evolving from being a rapidly growing import market to playing a more flexible role with an increased ability to balance the global LNG market, the report said. "When we look at the characteristics that Europe had that allowed it to play that balancing role (in the years before Ukraine's invasion), many of them are positioned in China today, or have been growing very rapidly in China today," Hill said. "China has the combination of domestic production, pipelines, long distance pipeline imports, LNG imports infrastructure, gas storage, alternative fuel capability, that allows it to adjust its energy mix," he added.
China handed back the title of top LNG importer to Japan in 2022 as demand slowed amid its strict zero-COVID lockdown measures and as high spot prices curbed purchases.
Analysts expect China's LNG demand to rebound to between
70-72 million tonnes in 2023, short of 2021's record levels, as
LNG prices are set to remain relatively high and as lingering
effects of the pandemic curb demand.
Total global LNG trade reached 397 million tonnes in 2022.
Industry forecasts expect demand to jump to 700 million tonnes
by 2040, Shell said, adding that a supply-demand gap is expected
to emerge by the late 2020s.
(Reporting by Marwa Rashad in London and Emily Chow in
Singapore; Editing by David Goodman, Jason Neely and Mike
Harrison)
