Shell sees LNG market growth at 4% a year, plans to ‘grow with it’: CEO

Anglo-Dutch major Shell expects the global LNG market to grow by 4% a year to 2035 and the company plans to “grow with it,” maintaining its leading position in the market, CEO Ben van Beurden said.

Speaking at a management day in London, van Beurden said the company had an “unmatched” LNG supply portfolio globally with a 22% share of global LNG sales in 2018, and a trading function that allowed Shell to do “serious” optimization.

Global LNG imports in 2018 were some 314 million mt, according to industry group GIIGNL, but Shell sees the market doubling in size by 2035.

“The gas market and LNG in particular will continue to grow,” van Beurden said, adding that by 2035 more than 70% of energy demand growth will be met by gas and renewables combined.

China and India, he said, would drive a lot of that growth thanks to their stated policy goal of a preference for gas over coal in power generation.

Speaking later Tuesday to analysts, Shell’s head of integrated gas, Maarten Wetselaar, said the increasing demand for LNG in the short term is expected to be well met by some 35 million mt/year of additional liquefaction capacity coming on stream in 2019.

“But we still expect a supply shortage to develop in the early to mid-2020s as demand continues to grow,” Wetselaar said.

SHELL SALES

Shell sold 71 million mt of LNG in 2018, made up of its equity liftings, joint venture marketed LNG and volumes bought from the market.

According to slides accompanying Shell’s management day presentation, its liquefaction volumes accounted for a little under 50% of its total sales, with the remainder made up of sales from purchases of both term and spot LNG.

On pricing, Shell’s LNG sales were predominantly oil-indexed with a 3-6 month time lag, with the remaining third of sales linked to gas hubs — such as the UK NBP or US Henry Hub — or considered spot sales.

“We sourced 58 million mt of LNG from more than 20 sources with the single biggest source accounting for only 8% of the total volume sold,” Wetselaar said.

“In addition, we sourced and delivered some 13 million mt of spot volumes equivalent to 200 cargoes. And apart from this mixed supply portfolio, our sales portfolios is equally diverse with varying contract duration, flexibility and indexation,” he said.

NEW MARKETS

Wetselaar said the number of LNG importing countries had grown to 42, with Shell currently supplying 76 customers in 27 of those countries.

“We are actively developing new markets and penetrating deeper in gas value chains,” he said.

Shell is also hoping to develop a growing market for LNG as a fuel for transport.

Wetselaar said in Europe, the number of LNG-fueled trucks is expected to grow from around 5,500 to about 280,000 by 2030.

He added that global demand for LNG as a bunker fuel in shipping was set to increase to almost 20 million mt/year in the same time frame.

Shell last year achieved an LNG liquefaction capacity utilization rate of 87%, up from 81% the year before.

“With continued attention to the reliability of our assets and by realizing major backfill opportunities, we are confident that we can increase the utilization to around 90% or more,” Wetselaar said.
Source: Platts