Future of LNG demand

Forecasting LNG demand is a difficult task. LNG demand is closely tied to general global economic growth, level of energy efficiency, and the cost and availability of competing energy sources such as gas delivered by pipeline, coal, oil, renewables, and nuclear energy.

Global LNG demand is expected to increase by about 70% or by about 180 mtpa.

Three countries (China, South Korea and Japan) made up approximately 60 per cent of global LNG imports in 2014, but these markets could account for much less than 60 per cent in the future. It was expected that Asian demand could be sustained at high prices. The massive build-up of LNG supply in recent years was predicated on growing Asian demand.

China’s LNG demand

China’s LNG demand will be lower than initially expected. Chinese economic growth is slowing and becoming gradually less energy intensive. China’s primary energy mix in 2014 was: coal 66 per cent, oil 17.1 per cent, natural gas 5.5 per cent, and hydro, nuclear, wind and other renewables 11.3 per cent. Natural gas demand in China has grown substantially since the adoption of the twelfth five-year plan. The 12th five-year plan forecasted natural gas consumption as a percentage of the overall energy mix will increase to more than 10 per cent by 2020 (266 mt or ~360 bcm). The plan aimed greater use in cities and for transportation and, to a lesser extent, for power generation to replace coal. However, natural gas was only 5.5 per cent of the overall energy mix at the end of 2014 (Accenture, p. 15).

China’s LNG has to compete against Eurasian pipeline gas as well as coal. The construction of the Siberian pipeline (38 bcm) will have a significant impact on how much LNG is imported. The Chinese government is also strongly encouraging the development of renewable energy (Accenture, p. 15).

Japan’s LNG demand

Japanese natural gas consumption will continue to decline past 2020 and settle at 84 bcm by 2030. This is 32 per cent less than the 123 bcm of LNG imported by Japan in 2014 (Accenture, p. 7).

The re-start of nuclear reactors, which is currently underway, is reducing LNG demand. The growth in renewables is aggressive, more than doubling to 23 per cent of the electricity mix (KPMG, p. 3).

South Korea’s LNG demand

The South Korean Energy and Economics Institute (KEEI) estimates that after strong natural gas consumption growth each year following 2009, natural gas consumption fell by 10 per cent in 2014. In 2015, natural gas demand fell more than expected in South Korea (Accenture, p. 12). The decrease in the use of natural gas is attributed to increasing use of nuclear or coal for generation.

The share of nuclear, coal and renewables in power generation have increased with nuclear and coal continuing to dominate base-load generation. South Korea added almost one GW (giga watt) capacity of renewables in 2013 and again in 2014 (Accenture, p. 13).

India’s LNG demand

India is a bright spot for demand, with robust economic growth and the current government determined to bring electricity to all Indians (KPMG, p. 3).

India could be the largest and fastest growing market for LNG. India imported 19 bcm of LNG in 2014, but the government forecasts demand will almost triple by 2020, growing to more than 52 bcm (Accenture, p. 18).

References:

• Accenture, “Gas grows up, part I: developing new sources of LNG demand,” 2016.
• KPMG, “Uncharted waters: LNG demand in a transforming industry,” November 2015.