On February 25, Shell released its latest LNG Prospects Report. The report points out that due to strong demand for cleaner fuels in Asia, the use of liquefied natural gas (LNG) continued to grow in 2018, with global demand increasing by 27 million tons to 319 million tons over the previous year. By 2020, global LNG demand will reach about 384 million tons. With the sustained and rapid growth of LNG demand, it is expected that the supply of LNG will be tight in the mid-1920s.

The report predicts that global LNG supply will increase by 35 million tons in 2019, and Europe and Asia are expected to absorb these new supplies completely.

In terms of demand, growth in Asia, especially in China, has been highlighted. In 2018, China’s LNG imports surged by 16 million tons, an increase of 40% over the previous year. “In 2018, Asian demand for LNG surpassed expectations again, and this strong growth is expected to continue. Investment in new supply projects is picking up and more investment will soon be in place. Maarten Wetselaar, executive director of Shell’s natural gas integration and new energy business, said.

On the supply side, Australia’s LNG exports will begin at the end of 2018, catching up with Qatar, the long-term leader, and will increase by 10 million tons in 2019. The two countries are ready to meet the demand for natural gas in Asia’s fast-growing economies to replace coal-fired power generation and heating to improve air quality.

At the same time, the report reminds us that the demand gap between LNG purchasers and suppliers tends to widen. Among them, LNG purchasers are more inclined to sign short-term, small batch, high flexibility contracts, thereby enhancing their competitiveness in the downstream electricity and gas markets. Most suppliers still want to sign long-term LNG sales contracts to obtain financing. Shell pointed out in its report that the difference in demand between buyers and suppliers must be addressed so that project developers can start implementing new projects.

From the current situation of signing trade contracts, the average duration of contracts signed in 2018 is 13 years, more than doubling compared with the six years in 2017, and the total contract volume has also increased more than doubled, reaching 600 million tons in 2018. Although LNG purchasers and suppliers have different tendencies in the way of contract signing, LNG trade activity continues to increase.