Shell’s New LNG Forecast Rekindles Confidence in Brass LNG’s Future

Chineme Okafor in Abuja

A new forecast on the global liquefied natural gas (LNG) market by Royal Dutch Shell has disclosed that demand for LNG would continue to grow at an average of five per cent annually until 2030, thus rekindling confidence that Nigeria’s $15 billion Brass Liquefied Natural Gas (LNG) project could still be profitable if executed.

The forecast was released by Shell, and obtained by THISDAY tuesday in Abuja.

It said the projected five per cent annual growth rate for the LNG market would be driven by the increasing number of buyers recorded since 2015 and from which China and India were the fastest growing buyers.
Global LNG demand, it noted, reached 265 million tonnes (MT) in 2016 while the number of buyers grew to 35 from 10 that it was at the start of the century.

It listed Colombia, Egypt, Jamaica, Jordan, Pakistan and Poland as the six new countries that have joined the growing number of LNG importers.

Recently, THISDAY reported that shareholders of the Brass LNG project met in London between January 10 and 12, 2017 to take a decision on the multi-billion dollar project whose Final Investment Decision (FID) has been suspended for a long time now.

Shareholders in the Brass LNG project – the Nigerian National Petroleum Corporation (NNPC), Total and ENI, have invested funds in its early works but continuing on it has remained uncertain despite their assurances that it would eventually take off because according to them, it remained viable.

However, Shell said in the forecast that there would be LNG demand growths to be closed after 2020.
It stated: “The LNG industry will need to make large investments to supply demand growth after 2020.”

It also explained the forecast was the first of its kind for it in assessment of the global LNG market, adding: “Global demand for gas is expected to increase by two per cent a year between 2015 and 2030. LNG is set to rise at twice that rate at four to five per cent.

“Over the next two decades, as more countries have existing infrastructure with an import terminal or FSRU (floating storage regasification units), LNG will increasingly be used when there are shortages in domestic energy supply,” it stated.

The forecast further said the bulk of growth in LNG exports in 2016 came from Australia where exports increased by 15MT to a total of 44.3MT, while most new LNG demand growth will from 2020 to 2030 be driven by policy, FSRUs, replacing declining domestic gas production, small scale LNG and transport.

According to it, LNG prices are expected to continue to be determined by factors including oil prices, global LNG supply and demand dynamics, as well as the cost of new LNG facilities, just as the profile of LNG trade would change to meet the evolving needs of buyers, including shorter-term and lower-volume contracts.

“LNG use beyond the power sector is expected to continue to increase. In China, in 2015 its use as a fuel for transport was around 4MT. In 2016, there were more than 200,000 LNG-powered vehicles in the country. Over the next decade, LNG use in the heavy duty and marine transport sector is expected to grow in the Middle East, Europe, Southeast Asia and the USA,” the forecast added.

Similarly, Shell’s Director of Integrated Gas and New Energies, Maarten Wetselaar, said on the forecast that: “Global LNG trade demonstrated its flexibility time and again in 2016, responding to shortfalls in national and regional gas supply and to new emerging demand.

“The outlook for LNG demand is set to grow at twice the rate of gas demand, at four to five per cent a year between 2015 and 2030.”