Global LNG trade increased by 6.8% from 2021 to 2022, reaching approximately 401.5 million tonnes (mt). The pipeline gas supply shock from the Russia-Ukraine war led to increased LNG demand in Europe, rising prices and diverting additional cargo from Asia to Europe, according to the International Gas Union’s (ICU) LNG report.
The natural gas markets gradually rebalanced in 2023 despite tighter supply fundamentals. Reduced demand in Europe and mature markets in Asia softened the impact of the 2022 gas supply shock. As a result, prices decreased significantly in 2023, although they remained well above their historical averages in Asia and Europe.
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The surge in LNG imports in 2022 was mainly driven by Europe, which saw a significant annual increase of 50.4mt, a 66% increase compared with 2021, according to GlobalData. Last year, Europe imported 126.6mt of LNG, making it the world’s second-largest region for LNG imports as it aimed to compensate for the decrease in Russian gas pipeline volumes.
Meanwhile, Asia-Pacific remained the top region for LNG imports, bringing in 160.9mt in 2022, marking a 4.6mt increase from the previous year, according to the ICU.
However, the LNG industry has recently faced several issues due to geopolitical factors, slower global gas demand, recovery from the Covid-19 pandemic and volatile prices.
“The LNG industry has faced a series of challenges over the last year and a half, caused mainly by the Russia-Ukraine war, in turn causing a global impact on LNG supply, demand and prices,” said GlobalData senior upstream analyst Tosin Coker. “However, after an uncertain year and a half, in 2023, the market regained its balance.”
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By GlobalDataGeopolitics influencing the LNG industry
Geopolitical uncertainties pose the greatest risk to global gas markets in 2024. Factors such as Russia’s invasion of Ukraine increased tensions in the Middle East, and concerns about intentional interference with critical infrastructure like pipelines could lead to more volatility, the International Energy Agency’s (IEA) latest Gas Market Report states.
“Geopolitics is a major player in the LNG market of recent years,” GlobalData upstream analyst Rami Khrais said. “The Russia-Ukraine war and the retaliation by the EU in the form of sanctions on the country have caused tension within the European market. The Ukraine war and Europe’s need to diversify away from Russian gas supplies have underscored the Middle East’s role as an important energy supplier, particularly in LNG.”
Khrais added: “The two countries in the region that have particularly benefitted from this conflict are Algeria and Qatar. With Algeria increasing LNG capacity and shipment to European countries, Qatar has signed several long-term contracts with Germany and France for LNG supply. It is expected that more of these contracts will be signed in the near future, especially considering Qatar’s plan to boost its LNG production capacity from 77 million tonnes per annum (mtpa) to 142mtpa by 2027.”
According to GlobalData’s analysis of the top 20 themes impacting the oil and gas sector, the Russian LNG industry is the only area of concern in the global LNG sector. New sanctions have been imposed on Russia’s upcoming liquefaction terminal, Arctic LNG 2, leading some shareholders to withdraw their participation.
According to GlobalData upstream analyst Paul Hasselbrinck, geopolitical factors are a barrier to BRICS+ and OPEC+ countries’ market expansion, as many countries’ strained relations with the West limit their market and technology access. However, there are some positive aspects for them: China and India together account for 23% of all LNG imports, and their demand is met by up to 90% through exports from non-OPEC+ or BRICS+ nations.
Additionally, Hasselbrinck said the world’s top LNG producer, the US, has displayed uncertainty in supporting this industry amidst deliberations about its role in the energy transition, and has become more selective about its export destinations.
Market balance
The IEA report shows that global gas demand will grow by 2.5%, or 100 billion cubic metres (bcm) in 2024. Expected colder winter weather in the northern hemisphere in 2024, compared with the unusually mild temperatures experienced in 2023, will likely increase demand for space heating in residential and commercial sectors.
“In 2024, weak demand has been the biggest driver, thus causing European demand to drop by approximately 7%, while the Asian LNG demand has even been weaker,” said Coker. “However, what lies ahead for the industry is the steady motion for LNG investments and contracting activities.
“The lower prices have meant many Asian countries have contracted for LNG, as players and countries continue to position themselves in a market with limited Russian gas to Europe and increasing Asian LNG demand coupled with the growing and emerging economies.”
Global demand for natural gas increased by only 0.5% in 2023, with growth in China, North America and gas-rich countries in Africa and the Middle East partially offset by declines in other regions.
Along with OPEC+ countries, the BRICS nations could potentially make considerable revenues over the long term, granting them time to realign their economies to transition towards cleaner energies.
“While many BRICS+ and OPEC+ countries have exported LNG in the past, most of their gas exports go through pipelines, and most of these countries have struggled to consolidate their LNG export industry, currently dominated by non-members Australia, Qatar and the US,” Hasselbrinck said. “This group of countries are primarily LNG importers, having imported 192.1mt – 27% of all trade flows, in 2022, and exported 82.6mt – 11% of all trade flows.”
However, LNG imports in 2023 remained below 2021 levels, with natural gas demand growing by 7%. In contrast, natural gas consumption in Europe decreased by 7%, reaching its lowest level since 1995 due to the rapid expansion of renewables and increased availability of nuclear power.
As pandemic restrictions eased and economic activity resumed, China again became the world’s largest importer of LNG.
“China has recently regained its position as the leading importer of LNG, followed by Japan, South Korea, India and Taiwan,” Coker added. “Despite this, some Asian countries, such as Japan and South Korea, are to witness more nuclear capacity coming online, which may result in lower LNG imports in the coming years.”
Tighter LNG supplies
GlobalData’s Global LNG outlook to 2027 report shows that Africa supplied 34.7mtpa of non-contracted LNG in 2023 and is expected to supply 38mtpa in 2024. Similarly, Asia supplied 35.1mtpa, making it the largest non-contracted LNG supplier in 2023.
The Middle East supplied 6.6mtpa of LNG in 2023, is estimated to supply 10.7mtpa in 2024, and could jump to 18.5mtpa in 2025. North America tied with Africa, while Oceania supplied 25.8mtpa of LNG in 2023.
“With prospects of oil demand slowing after an estimated plateau around 2030 and gas increasingly looking like it will enjoy sustained demand in the mid-to-long term, BRCS+ and OPEC+ countries are well positioned to take advantage of this trend, amassing 68% of global remaining gas reserves,” Hasselbrinck added.
The IEA has stated that due to the tight supply expected in 2024, there will be a limited increase in global LNG output, which will restrain demand growth, particularly in Europe and the mature markets of Asia. This year, LNG supplies are projected to grow by 3.5%, a significant drop from the 8% growth rate between 2016–20.
Gas availability remained relatively constrained in 2023 due to the limited increase in global LNG production, which was below expectations. Consequently, the IEA report shows that the production growth was insufficient to counterbalance the ongoing decrease in Russian piped gas deliveries to Europe.
Additionally, the expansion in supply was heavily concentrated geographically, with the US emerging as the top LNG exporter globally, responsible for 80% of the additional LNG supply in 2023, it said.
Keisuke Sadamori, IEA director of energy markets and security, said in a statement: “The global gas market is entering a new period as the world gradually emerges from an energy crisis that had profound impacts on both the supply and demand sides.”
The global LNG industry has experienced significant shifts in demand and supply dynamics due to geopolitical tensions, as well as market uncertainties. While the LNG market has gradually rebalanced in 2023, geopolitical factors continue to pose risks and challenges for the industry in 2024.
As the industry navigates through these challenges, the focus remains on LNG investments, contracting activities, and the evolving energy transition landscape. With global gas demand expected to grow in 2024, the industry must address constraints in LNG production to meet the rising demand.
