Traditional LNG Exporters Expected to Become Net Importers, Driving Demand

Energy major Shell is anticipating a shift in the LNG market, with several traditional LNG exporter nations projected to transition into net importers. This transformation is expected to drive demand for LNG, potentially alleviating concerns about oversupply in the industry from numerous planned new projects.

According to Cedric Cremers, Shell’s president for integrated gas, countries such as Indonesia, Malaysia, and Algeria are likely to become net import markets in the future. This shift is due to the rising domestic gas demand in these nations coupled with declining production levels.

Cremers stated, “Our prediction is that between now and 2040, there will be close to 50 million tons of additional draw on the LNG market.” This shift in dynamics is further exemplified by Egypt, which transitioned into a net LNG importer last year.

Market Response and Challenges

Egypt is currently in discussions with energy firms and trading houses to acquire 40-60 LNG cargoes amid an escalating energy crisis ahead of peak summer demand. The country has already secured deals worth approximately $3 billion with Shell and TotalEnergies to ensure a stable LNG supply.

However, the LNG industry is facing challenges, including project delays during the COVID-19 pandemic, supply chain bottlenecks, and labor shortages on the U.S. Gulf Coast. The net increase in supply capacity in 2024 was limited to about 2 million metric tons per annum due to these factors.

Cremers highlighted that the industry may experience a more phased introduction of new supply capacity, leading to a potentially softer landing in terms of supply entering the market. Despite this, other producers, such as Diamond Gas International and TotalEnergies, anticipate a potential LNG supply glut around 2027 or 2028.

Future Outlook and Global Demand

Major projects, including QatarEnergy’s North Field East natural gas expansion project, are set to commence production in mid-2026. Additionally, companies in the U.S., the largest LNG exporter globally, are planning to approve over 90 million metric tons per year of new LNG production capacity in the current year.

Shell forecasts a 60% increase in global LNG demand by 2040, driven primarily by economic growth in Asia, the adoption of AI technologies, and efforts to reduce emissions in heavy industries and transportation. Cremers emphasized that Asian demand is price-sensitive, with a strong demand response observed when spot prices dropped below $10 per MMBtu.

Overall, the LNG market is poised for significant shifts in the coming years, with traditional exporters becoming importers and new projects altering the supply landscape. The industry’s ability to adapt to these changes will be crucial in meeting the evolving demand for LNG on a global scale.

(Source: Reuters – Reporting by Colleen Howe; Editing by Florence Tan and Tomasz Janowski)