Shell has come out with a bold forecast that global LNG demand will rise by 50% by 2040, largely on the back of China-led growth in Asia. But this looks optimistic given LNG remains pricier than coal, of which China and India have plenty.
The oil major released its LNG market outlook on Wednesday in which it estimated LNG demand will reach 625-685 million metric tons per year in 2040.
Shell’s case is largely built around robust demand growth in Asia, especially in China, which reclaimed the title of the world’s top LNG buyer in 2023 from Japan.
While that figure does look impressive, it fades in comparison to the 139.8 GW of coal-fired capacity China is currently building.
China has an operating fleet of 1,136.7 GW of coal-fired generation, but only 121.1 GW of gas- and oil-fired generation, according to the GEM (Global Energy Monitor).
What the GEM numbers show is that while China’s demand for natural gas is likely to rise in coming years, it’s reliance on coal as the mainstay of its electricity generation is locked in for decades to come.
There is a reason for this, and put simply it’s because China has vast resources of coal, and it can easily import any additional fuel it requires.
But most importantly coal is cheap, and is likely to remain considerably cheaper than LNG in coming years, unless Shell is also predicting a sharp decline in LNG prices, which would seem unlikely given the company expects a tight market for LNG in coming decades
