Shell’s 2025 LNG Outlook Predicts Significant Demand Growth

Shell plc (SHEL) recently released its forecast for the liquefied natural gas (LNG) market, predicting a 60% increase in demand by 2040. Asia is expected to drive much of this growth.

Shell suggests that the world will require more natural gas for power generation, heating, cooling, as well as for industrial and transportation purposes. The company notes that LNG will remain the energy source of choice due to its reliability and flexibility in meeting global energy demands. The projected LNG demand is estimated to range between 630 and 718 million tons per year by 2040, marking a significant upward revision from earlier estimates.

This surge in LNG demand underscores its essential role in addressing the energy gap faced by developing nations while also aiding in various decarbonization efforts.

Key Drivers of LNG Demand Increase

The anticipated increase in LNG demand over the next 15 years can be largely attributed to economic growth in Asia, initiatives aimed at reducing emissions in heavy industries and transportation, alongside the rising influence of artificial intelligence.

Countries such as China and India are rapidly developing their gas infrastructure to accommodate escalating energy demands while also making strides to lower carbon emissions. China is enhancing its LNG import capacities and expanding its pipeline network to serve an additional 150 million residents by 2030. Concurrently, India aims to provide gas access to 30 million more consumers over the next five years.

The marine sector finds LNG an economical shipping alternative that lowers emissions, leading to a swift transition towards LNG-powered vessels. Projections indicate that this sector could elevate annual LNG demand to over 16 million tons by 2030, a 60% increase from prior forecasts.

In Europe, LNG demand is expected to remain pivotal through 2030, as the region adapts its existing gas infrastructure to incorporate bio-LNG, synthetic LNG, or green hydrogen.

Market Dynamics for 2024

As of 2024, LNG trade experienced its smallest growth, expanding by only 2 million tons to achieve a total of 407 million tons. This stagnation in growth resulted from limited new supply developments and geopolitical tensions, particularly due to the Russia-Ukraine conflict, which has complicated pipeline gas flows and tightened the market, leading to increased prices.

In the first half of 2024, LNG prices fell to their lowest since 2022, though they rebounded mid-year as supply struggled to keep up with rising demand. China took advantage of lower prices, importing 79 million tons, while India’s imports rose to 27 million tons, reflecting a 20% year-on-year increase due to heightened power needs during hot summer periods.

LNG imports in Europe, on the other hand, dropped by 19% as strong renewable energy production and a slow recovery in industrial gas demand hampered its growth.

The Future of LNG

Looking ahead, Europe is projected to boost its LNG imports in 2025 to replenish gas storage levels. By 2030, the United States is expected to ramp up its LNG exports to 180 million tons annually, positioning itself as the leading global LNG exporter and contributing approximately one-third of the total global supply. Qatar is also expected to significantly boost its LNG output, but uncertainties linger regarding the timeline for new LNG projects.

Shell’s Zacks Rank and Noteworthy Investments

Shell plc, headquartered in London, is among the world’s major oil supermajors, engaging in extensive operations worldwide. Currently, SHEL holds a Zacks Rank of #3 (Hold).

Investors tracking the energy sector might consider some top-ranked stocks, including Repsol, S.A. (REPYY), Prairie Operating Co. (PROP), and Gulfport Energy Corporation (GPOR). Repsol and Prairie Operating both carry a Zacks Rank of #1 (Strong Buy), while Gulfport Energy holds a Zacks Rank of #2 (Buy). For a complete list of Zacks #1 Rank stocks, you can see here.

Repsol is engaged in exploring, developing, and producing crude oil and natural gas, along with transporting petroleum products. The expected earnings per share (EPS) growth rate for REPYY next year is 17%, exceeding the industry average of 13.1%.

Prairie Operating is primarily focused on developing oil and natural gas resources in the United States. The Zacks Consensus Estimate for PROP’s 2024 earnings indicates a robust year-over-year growth of 81.19%.

Gulfport Energy specializes in the exploration and development of natural gas and oil reserves in North America. The Zacks Consensus Estimate for GPOR’s 2024 earnings suggests a remarkable 108.53% year-over-year growth.

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Gulfport Energy Corporation (GPOR): Free Stock Analysis

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Shell PLC Unsponsored ADR (SHEL): Free Stock Analysis

This article originally published on Zacks Investment Research (zacks.com).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.