Shell Sees Demand Surging for Liquefied Natural Gas - The New York Times

Shell Sees Demand Surging for Liquefied Natural Gas - The New York Times

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Shell Sees Demand Surging for Liquefied Natural Gas

Asia will be the dominant consumer, while the U.S. will be the key supplier. In Europe, where L.N.G. has been a lifeline, the need will continue despite environmental concerns.

Reporting from London

Shell, Europe’s largest energy company, forecast on Wednesday that global demand for liquefied natural gas, which has been a lifeline for Europe after Russia cut off pipeline gas supplies, will surge by around 50 percent over the next 15 years.

The main source of growth is expected to be in China, which will switch from coal to gas in industry to cut emissions, Shell said.

The fuel, which is chilled to minus 260 degrees Fahrenheit and transported on specialized ships, has become a significant moneymaker for Shell as part of a unit that earned $7 billion last year. But it has also been a focus of criticism from some environmental groups as a source of greenhouse-gas emissions, especially methane.

The Biden administration recently put a temporary halt on approving new L.N.G. projects in the United States, which has become the world’s largest exporter of the fuel, in part to take time to assess the industry’s environmental impact.

In an interview, Steve Hill, executive vice president of Shell Energy, the unit that includes L.N.G., indicated that much of Shell’s optimism about this key business for the company rested on Asia and, particularly China. In 2023, that country led the world in growth in L.N.G. imports after a drop in 2022, when a surge in European demand drove up prices for the fuel.

Mr. Hill said that China was rapidly building infrastructure to increase imports. Liquefied natural gas requires specialized terminals to unload the cargoes as well as storage facilities for the gas. “We see China as being particularly important,” over the next decade, he said.

Mr. Hill said that China was likely to use the increased gas supplies not only to generate electric power but to heat buildings and in industries like steel.

In Europe, there has been an overall decline in gas consumption, especially since energy prices soared following the Russian invasion of Ukraine in 2022. But Shell continues to see Europe as a strong market for liquefied gas. The main reason: The curtailment of Russian supplies and the continued decline of domestic production, especially in the Netherlands, has boosted the role of L.N.G., which can be delivered to any port with a terminal.

Germany, the Netherlands and even Greece have scrambled to build importing facilities to make sure they retain access to gas.

Europe was once seen as a tepid market for L.N.G., where shippers would sell their gas if they had nowhere else to go, but that has changed, Mr. Hill said.

“Europe structurally needs the L.N.G. now going forward for the foreseeable future, ” Mr. Hill said.

Where will all the new liquefied gas come from? The United States will be key. Supplies from North America are expected to roughly double by 2030, meeting about 30 percent of global L.N.G. demand.

That very large role creates risks for global consumers, as shown by the U.S. decision to pause approvals of new export facilities.

The United States had been seen as a practically limitless source of the gas. Now, there is a realization that supplies could be restricted for political or other reasons.

The move “sends the wrong message at the wrong time about the reliability of the United States as an energy exporter,” wrote Benjamin Jensen and Yasir Atalan in a recent commentary published by the Center for Strategic and International Studies, a Washington-based research organization.

On Feb. 1, Shell’s chief executive, Wael Sawan, told analysts that Washington’s action could contribute to eroding “confidence in the longer-term potential of U.S. L.N.G.”

Mr. Hill said that because many new facilities are under construction in North America, a short hiatus in approving additional units was unlikely to have much impact for some time.

“In practice we don’t see it being particularly problematic as long as it doesn’t last for a long period,” he said.

Stanley Reed reports on energy, the environment and the Middle East from London. He has been a journalist for more than four decades. More about Stanley Reed

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