More than half of global gas supply growth until 2035 will be driven by US, while China, ASEAN, and South Asia will account for 95% of global LNG demand growth until at least 2035, says McKinsey Energy Insights, the global energy market intelligence and analytics arm of McKinsey & Company, in its latest Global Gas and LNG Outlook to 2035 report. The report reveals that gas is the only fossil fuel expected to continuously rise in demand through to 2035 and sets out a vision of a very different gas and LNG market dynamic.
The report reveals that, in 2018, China emerged as the world’s biggest importer of gas and LNG, overtaking Japan, and second biggest importer of LNG, overtaking South Korea. McKinsey expects demand to continue rising in the region, with China, ASEAN, and South Asia to account for 95% of global LNG demand growth until at least 2035. Total gas demand is set to rise by 0.9% p.a., while Asian gas demand is set to rise by 2.1% p.a. in the same period, driven primarily by power and gas-intensive industries.
On the supply side, more than half of the global growth of 635 bcm by 2035 is predicted to be driven by the United States—adding 380 billion cubic meters (bcm) —followed by Russia (+110 bcm), and Africa (+110 bcm). Meanwhile, Europe and the Rest of Asia’s gas supply is forecast to decline rapidly.
“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,” said Rahul Gupta, Associate Partner at McKinsey Energy Insights.
Finally, construction of new pipelines will add more than 200 bcm of cross-border gas capacity by 2025, with the United States and Russia retaining their positions as major piped gas exporters. Three US-Mexico projects reaching a total of 60 bcm are set to completed by the end of this year—the largest 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 bcm by 2020.
“In the last 12 months, a record volume of LNG projects took FID (over 60 mpta, 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 1,100 mtpa of capacity competing to fill the 125 mtpa supply gap by 2035” says Dumitru Dediu, Partner at McKinsey Energy Insights.
The Global Gas and LNG Outlook to 2035 covers the global gas demand outlook, supply outlook and changes in cross-border capacity. To read the summary, download a copy here.