Global demand for liquefied natural gas (LNG) is expected to surge by 50% by 2040, driven by higher demand from Asia, with coal-to-gas switching in China and a boost in LNG consumption to fuel economic growth in South and Southeast Asia, Shell said on Wednesday.

Last year, global trade in LNG reached 404 million tons, slightly higher than the 397 million tons in 2022, with tight supplies of LNG constraining growth, Shell, the world’s largest LNG trader, said in its annual Shell LNG Outlook 2024.

A milder winter in 2022/2023, high gas storage levels, modest economic recovery in China, and lower demand in Europe helped balance the global gas market during 2023, as prices stabilized. But volatility lingered, with periods of higher volatility sparked by supply security concerns. Tight supplies capped growth rates in LNG trade last year, while prices remained above historic averages, Shell noted.

Europe’s gas demand fell in 2023, due to demand destruction and elevated prices, while China’s natural gas demand outpaced moderate economic growth, Shell said. Meanwhile, gas demand in Japan, previously the world’s top LNG importer, continued to decline as more nuclear plants restarted operations, according to the UK-based supermajor.

In the longer term, the global LNG market is set to continue growing into the 2040s, largely driven by China’s industrial decarbonization and strengthening demand in other Asian countries, Shell says.

Despite the fact that demand for natural gas has peaked in some regions, global gas demand is expected to peak after 2040, according to Shell, whose view on demand peak is more than 10 years further out in time compared to the most recent estimates by the International Energy Agency.

The IEA said in its World Energy Outlook 2023 in October that global natural gas demand growth would slow down this decade compared to the decade to 2021 and peak by 2030.

By Tsvetana Paraskova