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Energy Currents
A Blog by Enerdynamics

Liquified Natural Gas (LNG) Will Supply the World with Natural Gas Well into the Future

by Bob Shively, Enerdynamics President and Lead Facilitator

The global market for liquefied natural gas (LNG) has been dynamic over the past year due to supply and demand growth, geopolitical conflicts, and early stages of a transition to cleaner energy sources. As countries around the world position themselves for the energy transition, LNG appears set to play a key role for years to come. 

Demand for Natural Gas and LNG
While many countries are implementing policies to reduce the consumption of fossil fuels so that greenhouse gas emissions will decline, we continue to see growth in natural gas consumption. The International Energy Agency (IEA) forecasts that the use of natural gas will increase this year in all regions of the world.

Source: International Energy Agency website

The IEA forecasts continued growth in natural gas consumption past 2030 with robust consumption continuing through 2050.

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Source: International Energy Agency World Energy Outlook 2023

Because much of the consumption will occur in countries without sufficient domestic production or access to adequate pipeline gas, much of the consumption will be served by LNG deliveries. The International Energy Forum forecasts that global LNG trade will increase by a further 25% by 2028.

The Current Status of LNG Demand
Sanctions on Russian gas, increasing supply and low gas prices in the U.S., and a desire to displace coal generation with cleaner gas have continued to drive LNG demand. With Russian pipeline gas supplies to Europe sharply curtailed, countries like Germany and Italy, among others have been driving demand for LNG imports from other sources like the U.S., Qatar, and Australia. Many countries in Europe have constructed new LNG terminals, thus increasing their dependence on LNG. In Asia, recovering economies and a renewed focus on energy security in China, India, and other fast-growing Asian markets have created additional growing demand. Many energy companies in China, India, Japan, and various European countries have struck long-term LNG purchase deals to lock in supplies. A wider range of countries have been active in purchasing spot market supplies.

The New Supply Wave
Growing demand has led to a wave of new LNG production coming online in recent years in Australia, Qatar, and the U.S. Recent events off the coast of Yemen have required the re-routing of ships going from the Middle East to Europe, increasing costs and shipping times. This has favored the ongoing purchases of U.S. LNG supply in Europe. The U.S., already the top world LNG exporter, will more than double its export capacity by 2027 and Qatar is planning to expand its export capacity by 85% by the end of the decade. Smaller increases in capacity are expected to come online in Oman and multiple African countries.

Source: Energy Information Administration Today in Energy

LNG and Decarbonization
While the growth of LNG offers energy security and promises to reduce energy costs for consumers in many countries, it also threatens to undermine climate goals and drag out the transition to zero-carbon energy sources. Though natural gas generation and consumption by industry emits less greenhouse gases than coal or fuel oil, the expansion of LNG infrastructure raises concerns about entrenching fossil fuel dependence for decades. There are concerns that emissions of greenhouse gases by gas production and through the LNG supply chain make it less beneficial than it might appear. This is especially concerning since methane, the primary component of natural gas, is a much more potent greenhouse gas than carbon dioxide in the initial years after it is released into the atmosphere. The industry needs to work diligently to adopt and implement reductions in methane release including monitoring, reporting, verification, and transparent action based on emissions data.

LNG’s Future
Although the world continues to transition to a future of low fossil fuels and low carbon energy, it appears that LNG will be a part of the energy mix for many years. Needs for energy security, low-cost fuel supply for industry and electric generation, and flexible generation resources to couple with wind and solar will likely outweigh environmental concerns. Continued efforts to decarbonize LNG as much as possible will be important for LNG to be a beneficial part of the energy transition.

Want to learn more about LNG and its role in the energy industry? Enerdynamics' online course LNG Overview is available on demand and covers what LNG is, how it is created and transported, how it is used, safety and environmental issues, regulation of the various LNG sectors, and how global LNG markets function. Learn more here.

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Natural gas markets , LNG , Liquefied Natural Gas , GHG ,