Global LNG demand is increasing

Shell’s LNG Outlook 2025 forecasts demand for liquefied natural gas (LNG) will rise by around 60% by 2040 (refer to chart above, left), largely driven by economic growth in Asia, emissions reductions in heavy industry and transport as well as the impact of artificial intelligence. Industry forecasts now expect LNG demand to reach 630-718 million tonnes a year by 2040, a higher forecast than last year. More than 170 million tonnes of new LNG supply is set to be available by 2030, helping to meet stronger gas demand, especially in Asia, but start-up timings of new LNG projects are uncertain. Shell also expect a continuing global LNG supply shortfall from about 2034.

“Upgraded forecasts show that the world will need more gas for power generation, heating and cooling, industry and transport to meet development and decarbonisation goals,” says Tom Summers, Senior Vice President for Shell LNG Marketing and Trading. “LNG will continue to be a fuel of choice because it’s a reliable, flexible and adaptable way to meet growing global energy demand.”

China is significantly increasing its LNG import capacity and aims to add piped gas connections for 150 million people by 2030 to meet increasing demand. India is also moving ahead with building natural gas infrastructure and adding gas connections to 30 million people over the next five years.

At the 2025 LNG Producer-Consumer Conference the Japanese Ministry of Economy, Trade and Industry (METI) stated LNG supply is expected to broadly align with demand scenarios projected by various institutions through the early 2030s. However, under high-demand scenarios, supply could become tight in the latter half of the 2030s (refer to chart above, right). On the supply side, projections are subject to significant uncertainty in the energy market, with the realization of planned and future LNG projects dependent on investment profitability and access to financing. On the demand side, particularly in emerging economies across Asia, it is important to recognize that demand levels may fluctuate depending on gas price trends, as these economies continue to grow. Under various Net-Zero scenarios an LNG surplus is forecast, but current evidence strongly suggests that the world will fall well short of Net-Zero by 2050, given the huge investments required and the potentially negative economic consequences on the way to getting there.

In the METI’s view, economic growth is expected to drive a continued increase in energy demand, and natural gas, including LNG, is anticipated to play an important role in meeting this growth. Gas-fired power plants contribute to power system stability by balancing the intermittency associated with the expansion of renewable energy. Additionally, as gas-fired generation emits fewer greenhouse gases than coal, fuel switching can support emissions reductions. Moreover, existing gas and LNG infrastructure can be repurposed for emerging low-carbon fuels such as biogas, e-methane, hydrogen, and ammonia, offering further decarbonization potential across the energy value chain. As such, LNG is expected to retain an important role during the energy transition.

Investment in upstream natural gas assets declined between 2015 and around 2020. This was due to a combination of factors, including the oil price decrease, policy and demand uncertainty following the Paris Agreement, increasingly stringent regulations on upstream oil and gas investments, and a strategic shift among energy companies toward renewables. Additionally, energy companies with high leverage suffered from the sharp decline in oil prices. However, since 2021, heightened concerns over energy security, particularly following Russia’s invasion of Ukraine, and the associated spike in commodity prices have reignited upstream investment. Investment in LNG liquefaction projects, which had been constrained during the oil price slump, surged in 2018–2019 in anticipation of the increase of oil price and demand recovery. In 2019, the volume of liquefaction capacity reaching final investment decision (FID) marked a record high. Since 2021, large-scale projects such as Rio Grande Phase 1, Port Arthur Phase 1, and Plaquemines Phase 2 in the United States, and the North Field expansion in Qatar, have also reached FID, pushing liquefaction investment volumes upward.

Remarkably, Australia has not played a major role in this LNG investment surge.