LONDON (Reuters) – The global liquefied natural gas (LNG) market is expected to remain tight this year after last year’s volatility that saw demand rise 6% and gas prices hit a record high, said Shell Monday.
Global natural gas prices soared late last year due to a combination of tight supply, weaker renewable energy production and strong growth after Covid-19.
“The high prices we’re seeing right now are driven by fundamentals, low storage levels and supply uncertainty,” said Steve Hill, executive vice president, energy marketing.
He added that lack of new supplies and reduced investment in LNG are other reasons behind the tight market.
Shell, the world’s biggest buyer and seller of LNG, said earlier on Monday that global liquefied natural gas trade in 2021 rose 6% year on year to 380 million tonnes as economies recovered from the slump. impact of the COVID-19 pandemic.
LNG demand is expected to almost double to 700 million tonnes by 2040, Shell said in its annual LNG market outlook, adding that liquefied gas has a key role to play as a back-up in the event of an emergency. intermittent renewable supply.
Soaring gas prices have bankrupted around 30 UK energy suppliers while some heavy industry companies have cut production in energy-intensive sectors.
LNG prices have gone from record lows of less than $2 per mmBtu in 2020 to record highs of $56 in October 2021.
Benchmark prices currently sit at around $25 per mmBtu.
“Last year has shown how crucial gas and LNG are in providing energy to communities around the world,” said Wael Sawan, integrated solutions director for gas, renewables and power. at Shell.
The world’s No. 2 listed energy company said more investment was needed to meet growing demand for LNG, particularly in Asia, especially with a forecast gap between supply and demand amid 2020s.
China and South Korea led LNG demand growth in 2021.
China increased its LNG imports by 12 million tonnes to 79 million.
Last year, Chinese LNG buyers signed long-term contracts for more than 20 million tonnes per year.
Global LNG exports increased in 2021 despite outages that reduced the availability of LNG for delivery. The United States led export growth with a year-on-year increase of 24 million tonnes, according to Shell’s report.
The US Energy Information Administration predicts that US LNG exports will reach 11.5 billion cubic feet per day (bcfd) in 2022, becoming the world’s largest LNG exporter ahead of Australia and Qatar.