February 27, 2024 [Investor]- Driven by China’s industrial decarbonisation, the global liquefied natural gas (LNG) market will continue to grow into the 2040s, according to a new report.
As industrial coal-to-gas switching gathers pace in China, amid its modest economic recovery, global demand for LNG is estimated to rise by more than 50% by 2040, according to Shell’s LNG Outlook 2024 report.
The report shows that the development of China’s gas infrastructure has been accelerating in recent years. The growth in scale and connectivity has also enabled China to balance the LNG market worldwide, it said.
According to the report, long-term gas and LNG demand outlook in China remains strong while supply diversification is also a key characteristic of the growth in the country.
China has been ramping up construction of LNG infrastructure in recent years, including receiving terminals and storage facilities, as the country prioritises a transition away from coal.
The total turnover capacity of LNG receiving stations in China reached 97.3 million tonnes per year by the end of 2022, according to the Economics and Technology Research Institute under China National Petroleum Corp.
“China is likely to dominate LNG demand growth this decade as its industry seeks to cut carbon emissions by switching from coal to gas,” said Steve Hill, executive vice-president for Shell Energy.
Hill said gas has an essential role to play in tackling the carbon emissions in China’s steel sector by replacing coal during the production process.
China’s natural-gas market achieved growth last year amid economic recovery. Data from the National Development and Reform Commission revealed that China’s apparent natural-gas consumption exceeded 394.53 billion cubic metres, an increase of 7.6% year-on-year.
China also overtook Japan as the world’s largest LNG importer last year, with imports reaching 71.32 million tonnes, up 12.6% year-on-year, it said.
According to BloombergNEF, China’s optimised anti-Covid-19 measures last year have lifted gas consumption since the second quarter of 2023, with total demand in 2023 reaching 384 billion cubic metres, 4.8% higher than that the year before.
The residential and commercial sector’s gas demand gained from the optimisation of measures, while transport gas consumption spiked as LNG trucks became more cost-competitive compared with diesel ones, it said.
China has become the dominant force in LNG worldwide as it works toward a green transition with what is seen as a relatively clean bridge fuel, said Li Ziyue, an analyst with BloombergNEF.
Li said gas burn in the transport sector is set to see the fastest growth due to the favourable economics of natural-gas commercial vehicles.
“Power gas burn may grow fast with a gas power capacity expansion and lower fuel prices,” she said.
State-owned enterprises have led China’s expansion of its capacity to handle LNG, while private companies are playing an increasingly active role in building LNG terminals, she said.
About 60% of the LNG facilities under construction are by state-owned enterprises, while the rest are by private companies in China, Li added.
China is among the countries with an extensive list of LNG terminals under construction, with some being constructed from scratch and many existing terminals undergoing expansion, Anne-Sophie Corbeau, a researcher with the Center on Global Energy Policy at Columbia University, was quoted as saying by South China Morning Post.
BloombergNEF said it expects China’s base-case natural gas demand in 2024 to increase 7% year-on-year to 413 billion cubic metres, while LNG imports are estimated to rise 7% annually to 76 million tonnes this year.
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