Baku, Azerbaijan, Sept.2
By Leman Zeynalova – Trend:
Demand for liquefied natural gas (LNG) will post strong growth across our forecast period to 2028, outperforming the wider energy complex, Trend reports with reference to Fitch Solutions Macro Research (a unit of Fitch Group).
The company believes that emerging Asia will dominate, due to rapid rising energy demand, inadequate domestic gas supplies and fuel-switching away from oil and coal.
“China will see its share in growth progressively diluted, as buyers diversify across the region. Outside of Asia the outlook for EM demand is more clouded. LNG demand growth in MENA will slow, dragged down by rising regional output,” reads the analysis released by Fitch Solutions.
Latin America tells a similar story, with strong domestic gas demand offset by higher local output and rising competition from piped gas, according to the company analysts.
“Several trends underway in the market are favourable to opening up new pockets of EM demand, including technological innovation and increasingly flexible global supply. DMs are also set to stage a recovery, with DMs in both Europe and Asia posting higher growth,” said the analysis.
“Demand for LNG will post strong growth across our 10-year forecast period, outperforming the wider energy complex. Although the factors driving growth vary by market, they have some common threads. The collapse in LNG prices from 2014 has been among the key drivers in recent years. Lower prices stoked demand among traditional buyers and drew a number of new entrants into the market. However, contract prices are rising and will weigh on some markets going forward. This is reflected in the slower pace of forecast growth, averaging 5 percent y-o-y up to 2028.”
Other factors will provide more lasting tailwinds to growth, including rising energy demand, stronger environmental mandates, rapidly growing and more flexible global LNG supply and continued technological innovation in the sector, according to the company.
“Perhaps the most important of these is the marked strengthening of domestic environmental policies, as governments seek to reduce harmful greenhouse gas emissions and improve urban air quality. This is supporting a rapid switch to natural gas in a number of markets, both developed and emerging. Our data indicate that this government-led shift in the energy mix will be the largest source of LNG demand growth over the next 10 years. Domestic production declines and dis placement of pipeline supplies also increase the scope for growth in some markets.”
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