Increased demand from Europe for liquefied natural gas (LNG) will increase competition with Asia for additional LNG supplies, while new supply will remain limited over the next two years. Shell writes this in a report on the LNG market.
Due to the war in Ukraine and the sharp drop in supplies of Russian natural gas, Europe is importing much more LNG from elsewhere in the world.
According to Shell, European countries, including the United Kingdom, imported 121 million tonnes of LNG last year. That is an increase of 60 percent compared to 2021. However, thanks to the increased imports and the mild winter weather, Europe could fill its gas supplies well, and there were no gas shortages.
As a result, the European gas price fell sharply in the autumn after very high levels were reached in August. Because of these high prices, southern Asia imported less LNG and countries such as India, and Bangladesh used more coal. Chinese LNG imports also decreased due to the strict corona restrictions that still applied there at the time. However, LNG demand from China is expected to pick up again now that those restrictions have been lifted.
Due to the sharp drop in gas supplies from Russia and the European desire to eliminate dependence on Russian fossil fuels, LNG is becoming a progressively important pillar of European energy security, according to Shell. To support that import, more and more LNG terminals are being built in northwestern Europe.
“The war in Ukraine has had far-reaching effects on global energy security and brought about structural changes that are likely to affect the global LNG industry in the long term,” Shell said in the report.