Shell sees demand for liquefied natural gas increasing

Shell, Europe's largest energy company, forecast on Wednesday that global demand for liquefied natural gas, which has been vital to Europe after Russia cut off pipeline gas supplies, will rise by about 50 percent over the next 15 years.

The main source of growth is expected to be in China, where the industry will switch from coal to gas to cut emissions, Shell said.

The fuel, which is cooled to minus 260 degrees Fahrenheit and transported on specialized ships, has become a major money-maker for Shell as part of a unit that made $7 billion last year. But it is also a focus of some environmental groups as a source of greenhouse gas emissions, especially methane.

The Biden administration recently paused approval of new LNG projects in the United States, which has become the world's largest exporter of the fuel, in part to take time to assess the industry's impact on the environment .

In an interview, Steve Hill, executive vice president of Shell Energy, the division that includes LNG, indicated that much of Shell's optimism about this important business activity for the company rested on Asia and especially China. In 2023, that country led the world in LNG import growth, after a decline in 2022 when a surge in European demand pushed up prices for the fuel.

Mr Hill said China was rapidly building infrastructure to increase imports. Liquefied natural gas requires specialized terminals to unload the cargo, as well as storage facilities for the gas. “We view China as particularly important for the next decade,” he said.

Mr Hill said China was likely to use increased gas supplies not only to generate electricity but also to heat buildings and in industries such as steel.

There has been an overall decline in gas consumption in Europe, especially since energy prices soared following Russia's invasion of Ukraine in 2022. But Shell continues to see Europe as a strong market for liquefied gas. The main reason: the curtailment of Russian supplies and the continued decline in domestic production, especially in the Netherlands, have increased the role of LNG, which can be supplied to any port with a terminal.

Germany, the Netherlands and even Greece have made efforts to build import facilities to ensure they maintain access to gas.

Europe was once seen as a tepid market for LNG, where shippers would sell their gas if they had nowhere else to go, but that has changed, Mr. Hill said.

“Europe now needs LNG structurally for the foreseeable future,” Mr Hill said.

Where will all the new liquid gas come from? The United States will be the key. Supply from North America is expected to roughly double by 2030, meeting approximately 30 percent of global LNG demand.

That very large role poses risks to global consumers, as evidenced by the US decision to suspend approval of new export facilities.

The United States was seen as a virtually unlimited source of gas. Now there is the realization that supplies may be limited for political or other reasons.

The move “sends the wrong message at the wrong time about the reliability of the United States as an energy exporter,” Benjamin Jensen and Yasir Atalan wrote. in a recently published commentary by the Center for Strategic and International Studies, a Washington-based research organization.

On February 1, Shell CEO Wael Sawan told analysts that Washington's action could contribute to eroding “confidence in USLNG's longer-term potential.”

Mr. Hill said that because many new facilities are under construction in North America, a short pause in approving additional units is unlikely to have much impact. for some time.

“In practice, we don't see it as particularly problematic as long as it doesn't last long,” he says.