Emerging markets are the main force of global LNG demand growth
Natural gas supply in many countries is difficult to meet demand. According to BMI statistics, the top 20 countries in the future will account for more than 75% of the total incremental demand for natural gas. Among these 20 countries, only the United States, Iran and Saudi Arabia can meet their demand for natural gas, so many countries need to import natural gas to meet their domestic demand.
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LNG will develop rapidly in emerging markets with its flexibility. LNG is suitable for market areas where pipelines are not accessible or not connected yet. This means that LNG will have great development opportunities in Asia-Pacific, Middle East, Africa and Latin America, where infrastructure construction is relatively backward, such as natural gas pipeline network and gas storage. With the continuous progress of industry technology, LNG will flourish in more small-scale markets. Overall, LNG’s new demand mainly comes from emerging markets such as Bahrain, Croatia, El Salvador, Panama, Ivory Coast, Ghana, Bangladesh and Vietnam. BMI predicts that new LNG receivers in emerging markets will account for about 70% of the global total capacity increment in the next five years.
Floating LNG Receiver Technology and Flexible LNG Contract Promote Global LNG Demand Growth
Floating LNG receiving station reduces LNG import threshold. Technological development has always been a key factor in promoting LNG demand growth in emerging markets. At present, the technology of floating LNG receiving station is developing rapidly, and more and more countries regard it as the preferred LNG receiving station scheme. Floating LNG receiving station is an offshore LNG storage and re-gasification device which integrates the functions of LNG receiving, storage, gasification and transshipment. It has the functions of both LNG carrier and a mobile LNG receiving station. Floating LNG receiving station has the advantages of relatively low cost, short construction period and more flexible gas supply. Many new buyers who lack funds and slow construction of land LNG receiving station choose to import LNG through floating LNG receiving station. BMI predicts that the floating LNG receiving capacity will account for 66% of the global total capacity in the next 10 years, and most of the floating LNG receiving stations will be built in emerging markets.
Flexible contract model promotes LNG demand growth in emerging markets. In the past, LNG long-term trade contracts have been the mainstream of the natural gas industry. However, due to unstable demand for natural gas in emerging markets, large seasonal fluctuations, uncertain long-term demand prospects and relatively lack of funds, the volume of spot, short-term and medium-term LNG trade contracts has increased year by year, and the more flexible contract model of American LNG is also popular. In the future, more flexible LNG supply contracts and mature floating LNG terminal technology will further promote the rapid growth of LNG demand in emerging markets.
Over the next 10 years, LNG demand in Asia, Europe, the Middle East and North Africa will grow steadily, while the prospects for LNG demand in Latin America and the Caribbean and sub-Saharan Africa are not optimistic.
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Asia will lead the growth of global LNG market demand. With the increase of economic strength and population, energy demand in emerging markets in Asia is growing rapidly. Under the background that countries pay more attention to environmental protection, natural gas, as a clean energy, will play an important role in the energy structure, such as replacing coal in the field of urban gas and power generation, and oil in the field of transportation. In addition, due to the relatively lagging pipeline infrastructure construction in most emerging markets, they prefer to use LNG to meet local natural gas demand. In order to meet the demand for power generation gas (such as Pakistan), alleviate the decline of domestic natural gas production (such as Indonesia, Bangladesh), and respond to national environmental protection policies (such as India), many Asian countries are actively deploying LNG markets and increasing LNG imports. At present, China is leading the growth of global LNG demand, which accounted for about 50% of the global total growth in 2017. In the next few years, China will continue to be the key driving force for the growth of global natural gas demand and the transformation of pricing mechanism, as well as the most important factor driving the world natural gas market to turn to globalization.
The steady growth of LNG demand in Europe will become the second largest area of LNG receiving capacity increment. Although the utilization rate of LNG receiving stations in Europe is relatively low, its natural gas market is mature, large-scale, highly mobile and competitive. Importing more LNG is conducive to the formation of competition with domestic gas and imported pipeline gas, further improving the level of regional natural gas market competition and increasing the supply of natural gas. Therefore, unlike the new LNG receiving stations built in Asia to meet the new demand, Europe mainly aims to improve the security and flexibility of regional natural gas supply.
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LNG demand in the Middle East and North Africa will continue to expand. Natural gas is the main fuel for power generation in these two regions, so it accounts for a large proportion in the energy structure. With governments restricting crude oil as fuel for power generation and encouraging crude oil export, the dominant position of natural gas in power generation will be further strengthened. However, due to the imperfection of domestic natural gas pricing mechanism and regulatory system, the production of natural gas is limited, which will increase the import of natural gas. In addition, similar to Asia, regional pipeline networks and feeder pipelines in the Middle East and North Africa are lagging behind (especially in the Middle East), and domestic natural gas demand will tend to use LNG.
The prospects for LNG demand in Latin America and the Caribbean are not optimistic. Although the prospects for natural gas demand in Latin America and the Caribbean are good due to the steady development of macro-economy, the increase of per capita electricity consumption, environmental policy support and the government’s desire to reduce its heavy dependence on water and electricity, with the increase of natural gas production in the region and the competition for pipeline gas, the prospects for LNG market are similar to those of smaller markets in Central America and the Caribbean. Not optimistic, imported LNG may be squeezed out of the market.
Sub-Saharan Africa has less demand for LNG. Influenced by the shortage of LNG resources, the lack of stable suppliers, the small and decentralized energy market and the unsatisfactory business environment, it is expected that only Ivory Coast and Ghana will have LNG demand in sub-Saharan Africa. South Africa may import LNG, but the timing is uncertain.
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