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McKinsey launches Global Gas and LNG Outlook to 2035

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LNG Industry,

McKinsey Energy Insights has launched its Global Gas and LNG Outlook to 2035, revealing that gas is the only fossil fuel expected to continuously rise in demand through to 2035, and setting out a vision of a very different gas and LNG market dynamic.

According to McKinsey, the report reveals that, last year, China became the world’s largest importer of gas and LNG, overtaking Japan, and second biggest importer of LNG, overtaking South Korea. McKinsey expects demand to continue increasing in the region, with China, ASEAN, and South Asia to account for 95% of global LNG demand growth until at least 2035. In addition to this, McKinsey claims total gas demand is set to increase by 0.9% per year, while Asian gas demand is set to rise by 2.1% per year in the same period, driven primarily by power and gas-intensive industries.

On the supply side, over 50% of the global growth of 635 billion m3 by 2035 is predicted to be driven by the US – adding 380 billion m3 – followed by Russia (+110 billion m3) and Africa (+110 billion m3). Meanwhile, Europe and the Rest of Asia’s gas supply is forecast to decline rapidly.

Rahul Gupta, Associate Partner at McKinsey Energy Insights, said: “We’ll look back at this as a milestone year, when China became the world’s biggest LNG importer and we saw the highest volume of liquefaction projects taking FID. In many ways, that sets the tone through to 2035: Asian economies in the ascendancy – led by China – with growing energy demand; the US continuing to rank highly for both supply and demand; but on the supply side Europe and Asia’s second-tier economies falling away. Overall though, this is a growth story for gas and LNG.”

Finally, the report claims that the construction of new pipelines will add over 200 billion m3 of cross-border gas capacity by 2025, with the US and Russia retaining their positions as major piped gas exporters. Three US-Mexico projects reaching a total of 60 billion m3 are set to be completed by the end of 2019 – the biggest set of pipeline projects set be completed by 2025 globally. The world’s second largest set of pipeline projects expected to be completed by 2025 is Nord Stream 2, reaching a total of 55 billion m3 by 2020.

Dumitru Dediu, Partner at McKinsey Energy Insights, said: “In the last 12 months, a record volume of LNG projects took FID (over 60 million tpy, or 20% of today’s market), pushing the LNG supply-demand balance into the late 2020s. Looking ahead, only 1 in 10 proposed LNG projects will take FID, with over 100 LNG projects totaling 1100 million tpy of capacity competing to fill the 125 million tpy supply gap by 2035.”

According to McKinsey, the Global Gas and LNG Outlook to 2035 covers the global gas demand outlook, supply outlook and changes in cross-border capacity.

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