The effect of LNG growth on global gas markets

Around a third of the growth in LNG occurs over the next four years as a series of in-flight projects are completed. Strong growth is led by US and Australia, with demand remaining concentrated in Asia

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Spencer Dale, group chief economist, talks about the growth of demand for LNG

We think natural gas will grow strongly over the next 20 years ... moving to a globally integrated gas market, held together by liquefied natural gas.
Spencer Dale, group chief economist

Global LNG supplies grow strongly between now and 2035, led by growth in the US (19 Bcf/d) and Australia (13 Bcf/d).

After a temporary lull while this initial wave of LNG supplies is absorbed, growth is assumed to resume at a more moderate pace.

There is a risk that this second wave of LNG supply growth will be slow to materialize, causing a temporary period of tightness within LNG supplies.

Asia remains the largest destination for LNG. China, India and other Asian countries all increase their demand for LNG, helping gas grow faster than either oil or coal in each of these economies.

Europe also makes increasing recourse to LNG to help meet the growing gap caused by declines in its domestic production, as outlined in the base case.

Global LNG supplies grow strongly over the next 20 years, led by growth in the US

LNG supply (Bcf/d)

Growth in global LNG supply is led by the US, Australia and Africa

LNG demand (Bcf/d)

Demand for LNG is rising; making gas is the fastest-growing fossil fuel among Asian economies

Changes in gas markets

LNG grows seven times faster than pipeline gas trade, such that by 2035 it accounts for around half of all globally traded gas - up from 32% now.

The significance of the growing importance of LNG-based trade is that, unlike pipeline gas, LNG cargoes can be redirected to different parts of the world in response to regional fluctuations in demand and supply. As a result, gas markets are likely to become increasingly integrated across the world.

In particular, if prices move further apart than is warranted by transportation costs, there will be an incentive for LNG supplies to be redirected until prices move back into line.

Australian LNG supplies are normally likely to be absorbed within Asia. US LNG exports are likely to be more diversified, providing the marginal source of gas for markets in Europe, Asia and South and Central America. As such, US gas prices are likely to play a key role in anchoring gas prices in a globally integrated market.

The development of a deep and competitive LNG market is likely to cause long-term gas contracts to be increasingly indexed to spot LNG prices.

LNG grows twice as fast as international gas trade - to account for half of all globally traded gas by 2035

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