SHELL LNG OUTLOOK 2017

Demand absorbing Changing drivers of LNG demand growth

new supply LNG imports by role in domestic market (MTPA)
Countries/regions
LNG imports by role in meeting gas demand (MTPA) Gas market type Countries/regions
500

Bunker fuel
Atlantic Middle East US
Pacific Europe
■■ Strong growth in LNG supply in 2016, Balances Europe
Northwest LNG market Northwest Europe
400
one-third of new supply online LNG replaces India Egypt*
declining domestic Thailand Kuwait

Ku lan sh*

C ys s*

Pa am *
M ppi
LNG demand growth from China, India and

u
al ne

et ia

E *
ili ia
Indonesia UAE

ai e

ki *
production into

w d

ol ia
do *
ng
Th lad

UA stan
■■

In rain

Vi mb
Ph nes
Ba ait
Ba pt*
Eg a
300 existing demand Malaysia Colombia*

n
new entrants absorbed supply growth in 2016

h
y
di
Pakistan*

In

pe
Egypt and Pakistan have shown how quickly

LNG complements Southern Cone China

a
or one
■■

ro
ng p

ic
Si an* uro
domestic and pipeline Eastern Europe Singapore

er
N l Eu
in rn C

Isr the e
emerging LNG demand can start and grow

ste o*
200

Am
u or
rd E

ae rn
supply Southern Europe

Ea occ
Jo rn

So ap
Ch the
M a

th
North America

or
u
So
■■ LNG demand growth is coming from
Solely dependent on Japan Puerto Rico
countries that need to offset decline in 100 Dominican

LNG Korea

ic
Ta a o

pu n
Pu am

re Ric

bl
n a*
e a*

Re ica
domestic gas production and to meet Taiwan Republic

m
Do an
Pa aic
Ja an

in
Ko rto

iw
m
p
growing energy demand

Ja
0
■■ LNG use in the transport sector continues to 2000 2005 2010 2015 2020 2025 2030
grow globally to meet demand for a lower * Denotes new or emerging LNG importing countries

emissions alternative to diesel and heavy fuel oil LNG demand driver

Bunker Fuel LNG replaces declining domestic Gas supply solely

production into existing demand dependent on LNG

LNG compliments domestic

Balances LNG supply
and pipeline supply
Source: Shell interpretation of Wood Mackenzie Q4 2016 data

2016 import growth dominated by China, India and new entrants

Million
tonnes
8
Net imports vs 2015 = +17.0 million tonnes China
6

India Egypt
4

2 Pakistan
Jordan
0
Source: Shell interpretation of IHS (LNG Waterborne Trade) data, delivered volumes; red denotes new entrants (2015-2016)

Growing imports

2016 GLOBAL LNG DEMAND

NEW
6
35
IMPORTING

265
Enough to power COUNTRIES
6%
500
in 2015
and 2016:

ANNUAL AVERAGE MILLION

MILLION Colombia, Egypt, Jamaica,
DEMAND tonnes (MT)
homes per year
LNG Jordan, Pakistan and Poland
GROWTH IMPORTING
COUNTRIES
for global LNG up from 10 at the start
since 2000 of this century

Million
tonnes
Growth in LNG demand absorbed
2016 Supply Highlights 20
increase in supply

■■ 17 MT: increase in total global LNG exports Net exports:

15 2016 YoY
■■ 15 MT: increase in Australia exports
10
■■ 2.9 MT: delivered from the Sabine Pass terminal in Louisiana, USA

■■ 3.8 MT: increase in exports from Qatar, Indonesia and Angola 5

■■ 3.5 MT: fall in production from other Atlantic Basin projects 0

Supply Australia US Rest of World

-5 Source: Shell interpretation of IHS data, delivered volumes

Structural changes Trend to shorter and smaller contracts with emerging buyers
Average contract length, years Average contract volume, MTPA LNG buyer credit ratings

■■ Increased economic uncertainty has 20 2.5 100%

contributed to a decrease in final
16 2.0 80%
investment decisions
12 1.5 60%
■■ LNG sellers need a large portfolio and
8 1.0 40%
sufficient flexibility to supply a growing
number of countries, including more 4 0.5 20%

developing economies 0 0.0 0%

2008 2016 2008 2016 2008 2016

A-rated B-rated
Source: Shell interpretation of IHS (Energy LNG Sales Contracts Database), Moody’s and Fitch data Non-investment grade

Policymakers increasingly Future trends

choose gas
40% LESS

CO2 ■■ Continued LNG supply growth to 2020

LNG emits around 40% less CO2 than
■■ Global demand for gas is expected to increase
coal when burnt for electricity by 2% a year between 2015 and 2030; LNG
is set to rise at twice that rate at 4 to 5%

■■ Future LNG demand growth will be driven by:

China adopted its 13th Five Year Plan, which identifies 45 bcm of additional policy, floating storage regasification units,
gas demand – more than total gas demand in the Netherlands – to improve air replacing declining domestic gas production,
quality in cities. small scale LNG and transport

■■ LNG and Russian gas imports required to

France and Canada announced plans to phase out coal fired generation by 2023 balance European gas demand
and 2030 respectively, joining Austria, Belgium, Britain, Denmark and Portugal in
pledging to close coal fired generation by the end of the next decade. ■■ New investments required to meet growing
LNG demand after 2020
170+ members agree to a global 0.5% sulphur cap on marine fuel that will take effect ■■ LNG trade is changing to meet the evolving
from 2020. LNG as a fuel contains virtually zero sulphur vs. 3.5% specification for needs of buyers, including shorter-term and
global marine fuel today. lower-volume contracts

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