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Shell sees continued global LNG growth as coal alternative

Royal Dutch Shell’s new LNG outlook report projects that global liquefied natural gas demand will continue to rise in the years ahead – led by Asian growth – as Shell seeks to solidify its stake as the world’s LNG leader.

With natural gas continuing to replace coal as a cleaner-burning power source from the United States to China, Shell expects annual LNG demand worldwide to surge more than 30 percent  from 292 million metric tons in 2017 to 384 million tons in 2020. Last year, demand grew by 27 million tons, or more than 9 percent,  to 319 million, and this year demand should spike by another 11 percent or 35 million tons, Shell said.

Asia and Europe are expected to absorb all this additional supply in 2019 now that a rebound in long-term LNG contracting is taking hold along with the second wave of LNG export projects, including a slew of new construction along the Texas and Louisiana Gulf Coast.

Despite the LNG processing growth, Shell still expects supplies to tighten in the mid-2020s as demand keeps rising.

Environmentalists though remain divided on the merits of natural gas as a so-called bridge fuel as the world grows its renewable energy sources, like wind and solar power. Natural gas burns with about half of the greenhouse gas emissions as coal, but that doesn’t mean gas-burning is anywhere close to emission free. And there are additional issues with methane emissions during the gas production process and along gas pipelines.

Still, ongoing efforts to improve urban air quality saw China’s imports of LNG surge by 16 million tons in 2018, up 40 percent from 2017, Shell said, arguing that the switch from coal already has vastly improved air quality in Beijing and many other urban centers.

“The continued surge in Chinese LNG imports has helped improve air quality in some of its biggest cities over the last few years. China’s success in making the air cleaner for millions of people shows the critical role that natural gas can play in providing more and cleaner energy around the world,” said Maarten Wetselaar, Shell’s director of integrated gas and new energies.

On the supply side, Australian LNG exports have nearly caught up with those of long-time leading supplier Qatar. Australia and the United States are expected to keep increasing their LNG outputs.

The number of LNG-importing countries increased to 42 in 2018 as Panama and Bangladesh joined the marketplace.

After a lull in large new LNG contracts the last few years, such deals began to spike again in 2018. LNG trade has increased from 100 million tons in 2000 to 319 million tons in 2018.

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