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Botão, R.P.; De Medeiros Costa, H.K.; Dos Santos, E.M. Global Gas and Liquefied Natural Gas Markets. Encyclopedia. Available online: https://encyclopedia.pub/entry/46984 (accessed on 19 June 2024).
Botão RP, De Medeiros Costa HK, Dos Santos EM. Global Gas and Liquefied Natural Gas Markets. Encyclopedia. Available at: https://encyclopedia.pub/entry/46984. Accessed June 19, 2024.
Botão, Rodrigo Pereira, Hirdan Katarina De Medeiros Costa, Edmilson Moutinho Dos Santos. "Global Gas and Liquefied Natural Gas Markets" Encyclopedia, https://encyclopedia.pub/entry/46984 (accessed June 19, 2024).
Botão, R.P., De Medeiros Costa, H.K., & Dos Santos, E.M. (2023, July 19). Global Gas and Liquefied Natural Gas Markets. In Encyclopedia. https://encyclopedia.pub/entry/46984
Botão, Rodrigo Pereira, et al. "Global Gas and Liquefied Natural Gas Markets." Encyclopedia. Web. 19 July, 2023.
Global Gas and Liquefied Natural Gas Markets
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Market volatility is a key driver of energy security concerns. It can potentially disrupt the supply of energy resources, leading to price spikes and market imbalances. The COVID-19 pandemic has also contributed to market volatility in the energy sector, as the global economic slowdown has reduced demand for oil and gas, leading to a drop in prices. The global gas and liquefied natural gas (LNG) markets have experienced significant growth over the past few years, driven by the increasing demand from Asia and the adoption of gas in heavy-duty transport.

global gas market LNG market decarbonization policies energy transition

1. Introduction

The global gas and liquefied natural gas market is influenced by various factors, including the transition to cleaner energy sources, emerging Asian markets, and renewable energy policies. This systematic review aims to consolidate the existing literature to gain insights into the complex dynamics of the global gas and LNG market, encompassing demand drivers, market competition, and the role of major LNG importers.
Multiple studies highlight the significance of emerging Asian markets and the transition to clean energy in driving the global demand for gas and LNG. Zou (2022) emphasizes the pivotal role of emerging Asian countries in determining the scale of new LNG projects globally [1]. Fulwood (2020) identifies the potential for smaller Asian markets to contribute significantly to LNG demand in the coming decades [2]. Additionally, Najm (2020) demonstrates the negative impact of renewable energy adoption on the LNG trade, emphasizing the importance of investing in cleaner energy technologies to reduce global LNG trade [3].
Insights from several studies shed light on the dynamics of the global gas and LNG market. Liu (2020) attributes Australia’s LNG export performance to the Competitiveness Effect [4]. Chernyaev (2020) explores the current state of the LNG market, focusing on Russia’s role as an energy resource provider [5]. Merkulov (2020) examines global LNG production capacities, including regional structures and the influence of environmental regulations [6]. Chen (2021) analyzes historical trends in global LNG pricing and provides recommendations for China’s LNG import pricing mechanism. These studies indicate that the global LNG market is becoming increasingly competitive, necessitating strategies to accommodate new players, expand markets, and adapt to evolving pricing mechanisms [7].
Consistent findings across the reviewed papers identify China, India, Japan, South Korea, and Taiwan as the largest LNG importers globally. Vivoda (2014) and Vivoda (2019) discuss these five countries’ approaches to diversifying LNG imports [8][9]. Norman (2019) highlights explicitly China’s emergence as a major LNG importer due to its transition to cleaner fuels [10]. Shaikh (2016) assesses the stability of LNG supplies in the Asia Pacific region, considering the five largest importers [11]. This literature supports the notion that these countries will continue to perform substantial roles in the global LNG market.
This systematic review (Table 1) provides a comprehensive overview of the global gas and LNG market dynamics, addressing demand drivers, market competition, and the significance of major LNG importers. The findings underscore the importance of understanding the complex interplay between economic, environmental, and policy factors that shape the global gas and LNG landscape. Further research should focus on monitoring market developments, evolving pricing mechanisms, and the potential impact of emerging energy technologies on the future of the gas and LNG market.
Table 1. Key Authors and Contributions in the literature review on Global Gas and LNG Market Dynamics.

2. The LNG Global Market

The global liquefied natural gas market has experienced significant disruption and unprecedentedly high prices following Russia’s invasion of Ukraine in February 2022, which led to a decline in Russian pipeline gas shipments to the European Union. The resulting high demand for LNG from EU buyers led to record global spot prices and a reduction in the volume of LNG available to developing economies.
The LNG market is facing new risks to demand growth due to high prices and supply disruptions, leading to delays and cancellations of proposed LNG import projects in Asia. Additionally, key LNG growth markets are implementing new policies to reduce dependence on global gas imports, which could negatively impact long-term demand in regions expected to drive robust growth in the LNG industry.
In contrast, European countries have increased their LNG imports to compensate for Russia’s declining pipeline gas shipments. However, the EU’s climate and energy security policies are expected to reduce gas demand by at least 40% through 2030, which could cause a potential fall in LNG demand after 2023. Europe’s import capacity could increase by a third by the end of 2024 through the addition of new LNG terminals. Still, this new capacity may go unused because of the continent’s energy transition objectives [16].
High prices, COVID-19 shutdowns, slower economic growth, and rising concerns about fuel supply security and affordability are all causing Japan, South Korea, China, and South Asia to reduce their LNG purchases. Instead, they rely more on alternative energy sources, such as nuclear, wind, and solar power generation, lower-cost Russian pipeline imports, and domestic gas production [17]. Southeast Asia faces challenges due to high prices, limited LNG contract availability, and infrastructure constraints. Long-term contracts with delivery dates prior to 2026 are said to be sold out globally, leaving price-sensitive Southeast Asian buyers vulnerable to volatile and expensive spot markets.
The global gas and LNG markets are expected to evolve as market dynamics point to a structural change. The market is expected to remain tight until the mid-2020s as Europe and Asia compete for limited new LNG supply. The LNG supply is expected to reach 80 million tons, 60% of the total gas supply of 140 million tons. However, gas and LNG prices are expected to hit record levels in 2023 due to reduced gas imports from Russia, which will increase the use of coal in power generation in Germany [18].
As a result of high prices, industrial users in major European markets are expected to reduce their average gas use by 16% compared to 2021. LNG could become a core energy supply for Europe to meet its energy security needs. In 2023, China’s LNG imports are expected to fall by 15 million tons (or 19%) following strict COVID measures. Similarly, South Asian LNG imports are expected to drop by 5.8 million tons due to high prices [19].
The global LNG trade is expected to rise to 397 million tons, an increase of 16 million tons compared to 2021. There will be continued uptake of gas in heavy-duty transport, and the majority of new LNG supply to 2030 is expected to come from the US and Qatar. However, without further investment, a supply-demand gap will still loom.
The impact of high LNG prices will spur fuel switching, including coal use in Asia, which will have an impact on global emissions. The number of operating LNG vessels is expected to increase to 521, while there are 130 LNG vessels on order. There are currently 635 LNG fueling stations in Europe, some with Bio LNG and 39,600 LNG and Bio LNG fueled vehicles. China is expected to provide more flexibility to the global LNG market [20].
The International Energy Agency (IEA) has reported that natural gas markets worldwide continued to tighten in 2022 despite a 1.6% decline in global consumption. The demand for natural gas is projected to remain unchanged in 2023, but Russia’s future actions and fluctuating energy prices make the outlook uncertain [19]. Europe’s gas demand decreased by 13% and Asia’s by 2% due to high liquefied natural gas (LNG) prices, COVID-19-related disruptions in China, and mild weather conditions in Northeast Asia [21].
Global LNG trade will have more than doubled to USD 450 billion by 2022, with traded volumes increasing by 6%. On the other hand, the modest 5.5% increase in supply was due to maintenance at large liquefaction ports and a long outage at Freeport in the United States [12]. According to the IEEFA, global LNG prices will remain structurally high for several years due to weak supply growth and strong demand. Global LNG markets may remain tight until significant new supply comes online later this decade, causing periodic disruptions, according to McKinsey and Company’s Global LNG Market Outlook report [16].
According to the same report by McKinsey and Company (2021), the COVID-19 pandemic has accelerated structural shifts in the energy sector, particularly the transition towards cleaner and more diversified energy sources. The report suggests that LNG stakeholders should adapt to these shifts by investing in low-carbon technologies and exploring new business models that can deliver value in a changing market.
As the global LNG industry continues to expand, the risk of oversupply remains a critical concern for market participants, including producers, traders, and investors. The COVID-19 pandemic and its impact on global energy demand have added further uncertainty to the market, highlighting the need for LNG industry stakeholders to remain vigilant and agile in responding to evolving market dynamics.
One potential strategy for mitigating the risk of oversupply is to focus on developing new markets and diversifying demand sources. This could involve targeting emerging markets with strong long-term growth potential, such as Southeast Asia, India, and Latin America, where demand for cleaner and more efficient energy sources is increasing rapidly. In addition, efforts to promote LNG as a transportation fuel, particularly in the marine and heavy-duty road transport sectors, could create new demand sources and reduce reliance on traditional power generation markets [17].
Another critical factor for maintaining market stability and avoiding oversupply is effective coordination between industry stakeholders, including producers, traders, and regulators. Collaboration on infrastructure development, investment planning, and risk management can help ensure that new supply additions are balanced with corresponding increases in demand and adequate infrastructure to support efficient and cost-effective distribution.
Global LNG markets are expected to have limited supply additions in the coming years, and high prices will continue to lower Asian demand growth, particularly among price-sensitive emerging markets. European policymakers are taking aggressive measures to cut gas consumption and meet emissions reduction targets, which are likely to stabilize and reverse LNG demand growth on the continent later in the decade [16].
Along with declining gas consumption in Europe and global investments in cost-competitive energy alternatives, a supply glut may result in lower-than-anticipated prices, smaller netbacks, tighter margins, and lower profits for LNG exporters. These factors include high prices, weak LNG demand growth, and elevated price sensitivity in Asia. While the growth prospects for the global LNG market remain robust, industry stakeholders must remain vigilant in managing the risks associated with oversupply and market volatility. Diversifying demand sources, promoting the use of LNG in new sectors, and collaborating effectively across the value chain will be critical to ensuring long-term market stability and profitability [22].
As the industry navigates these challenges, Europe’s increased LNG imports and flexibility may stabilise the market. The region is expected to increase its LNG imports to offset lower Russian pipeline imports, which could relieve exporters facing weaker demand growth in other regions. Moreover, Europe’s commitment to reducing greenhouse gas emissions through policies promoting renewable energy and energy efficiency may create new opportunities for LNG as a transition fuel. The next section will explore Europe’s increased LNG imports and flexibility in more detail [4].
Natural gas is a vital source of energy for many countries around the world. According to the International Energy Agency (IEA), global natural gas consumption has steadily increased over the past decade, with demand expected to continue growing in the coming years. In terms of supply, the United States is currently the largest producer of natural gas, followed by Russia and Iran. Other major producers include Qatar, Canada, China, and Norway. The IEA reports that global natural gas production reached a record high in 2019, with an estimated 3.9 trillion cubic meters produced worldwide [23].
Regarding supply share by country, Russia is currently the largest exporter of natural gas, followed by Qatar and Norway. The United States has also become a major exporter in recent years due to its shale gas boom. In terms of importers, Japan is currently the largest importer of liquefied natural gas, followed by China and South Korea [14].
Natural gas import and export situation varies greatly depending on regional demand and supply dynamics. For example, Europe has become increasingly dependent on LNG imports due to declining domestic production and reduced pipeline imports from Russia. Meanwhile, Asia has seen a surge in LNG demand as countries such as China and India seek to transition away from coal-fired power generation. While there are some regional variations in supply and demand dynamics for natural gas, it remains an essential source of energy for many countries around the world [1][23].
The global natural gas supply has been on a steady rise, according to the International Energy Agency (IEA). Over the past decade, global natural gas consumption has increased, which is expected to continue in the coming years. The United States is currently the largest producer of natural gas, followed by Russia and Iran. Other significant producers include Qatar, Canada, China, and Norway [14]. In 2019, global natural gas production reached a record high of approximately 3.9 trillion cubic meters [15].
When examining the supply share of natural gas by country, Russia takes the lead as the largest exporter, followed by Qatar and Norway. The United States has also become a major exporter in recent years due to the shale gas boom. On the import side, Japan is the largest importer of liquefied natural gas (LNG), followed by China and South Korea. Natural gas import and export situation varies depending on regional demand and supply dynamics. For example, Europe has increasingly relied on LNG imports due to declining domestic production and reduced pipeline imports from Russia. Conversely, Asia has experienced a surge in LNG demand as countries such as China and India aim to shift away from coal-fired power generation [18].
In light of the growing demand for natural gas in emerging countries and its impact on global supply, the security of gas supply in Europe has become a paramount concern. The rapid growth of gas demand in emerging countries, such as China and India, presents a challenge to the stability of gas supply in Europe [3] as these countries increase their use of natural gas, competition for limited supplies of LNG intensifies, leading to potential price volatility and supply chain disruptions.
This competition for LNG supplies can significantly affect Europe’s gas market, mainly if Asian countries are willing to pay higher prices for LNG. European buyers may struggle to secure sufficient supplies at affordable prices, resulting in shortages and price spikes that adversely impact European consumers and businesses. To address these challenges, European countries are taking steps to enhance the security of their gas supplies. These measures include investments in new infrastructure such as pipelines and LNG terminals and diversification of supply sources. Some European countries are exploring new sources of natural gas, such as shale gas, or renewable gases, such as biogas, to ensure access to reliable and affordable supplies in the present and future [8].
While the rapid growth of gas demand in emerging countries poses challenges to the stability of gas supply in Europe, proactive measures can help mitigate these risks. By investing in infrastructure and diversifying supply sources, European countries can ensure access to reliable and affordable natural gas supplies [3]. Moreover, integrating the development of the gas market into long-term plans for achieving carbon neutrality is crucial. This involves aligning natural gas infrastructure investments with long-term emissions reduction goals, exploring technologies like renewable gases and carbon capture and storage, and implementing supportive policies and regulations. By integrating the gas market’s development into carbon neutrality efforts, countries can contribute to a more sustainable future in the face of climate change.

3. Impacts of Decarbonization Policies on the LNG Gas Market

The global energy landscape is experiencing a significant shift towards decarbonization as countries strive to mitigate climate change and transition to cleaner and more sustainable energy sources. As part of this transition, major gas buyers worldwide are implementing decarbonization policies that aim to reduce greenhouse gas emissions and promote the use of renewable energy sources. These policies have the potential to significantly impact the liquefied natural gas market, which has traditionally been a key player in meeting global energy demand. This article explores the potential effects of decarbonization policies on the LNG gas market and discusses their implications for industry stakeholders [9].
Adopting decarbonization policies by major gas buyers, such as China, India, Japan, South Korea, and Taiwan, can change their energy composition and reduce dependence on LNG as a primary energy source. This shift can be attributed to increased investments in renewable energy technologies, energy efficiency measures, and the electrification of various sectors. Consequently, there may be a decline in the demand for LNG, leading to significant implications for LNG exporters. They may witness a decrease in their market share and the need to explore alternative markets or adapt their business strategies accordingly [20].
Decarbonization policies commonly encompass measures such as carbon pricing, emissions regulations, and subsidies for renewable energy. These initiatives tend to raise the costs associated with the utilization of fossil fuels, including LNG, making it less economically attractive compared to cleaner alternatives. Consequently, LNG prices may become less competitive, potentially impacting the profitability of LNG projects and investments. Moreover, the inherent volatility of the LNG market may be further intensified by changing market conditions and policy interventions.
The influence of decarbonization policies extends to investment decisions within the LNG sector. With governments and investors prioritizing low-carbon technologies and infrastructure, capital could be reallocated away from LNG projects towards renewable energy initiatives. This shift poses challenges for developing LNG infrastructure, including the construction of liquefaction plants, storage facilities, and shipping infrastructure. Furthermore, existing LNG facilities may need to adapt to accommodate the evolving energy landscape by integrating technologies, such as carbon capture and storage (CCS), or exploring opportunities for renewable gas production [20].
Despite the challenges posed by decarbonization policies, the LNG gas market can still perform a significant role in the ongoing energy transition. LNG can serve as a transitional fuel in sectors where low-carbon alternatives are not yet readily accessible, such as heavy-duty transportation and industries with high-temperature heat requirements. Furthermore, advancements in LNG technologies, such as small-scale LNG and LNG bunkering for maritime applications, offer niche market opportunities and regional energy solutions [9].
Implementing decarbonization efforts is expected to decrease the overall demand for natural gas, including LNG. As countries embrace renewable energy technologies and adopt energy efficiency measures, the reliance on fossil fuel-based energy sources, including LNG, will likely diminish. Decarbonization policies may drive the substitution of LNG with lower-carbon alternatives. The increasing reliance on renewable energy sources, such as wind and solar power, and cleaner fuels, such as hydrogen, may further impact the demand for LNG in the market [10].
Furthermore, decarbonization policies can influence the regulatory framework governing natural gas usage. Governments may introduce stricter emission standards, carbon pricing mechanisms, or other regulations targeting greenhouse gas emissions associated with natural gas production, transportation, and consumption. These regulations can increase costs and operational challenges for LNG producers and buyers, potentially affecting the competitiveness and attractiveness of LNG as an energy source [24].
Moreover, decarbonization policies can stimulate investments in alternative energy infrastructure, such as renewable energy generation and energy storage. This investment would enhance the availability and affordability of clean energy options, further influencing the demand for LNG. The transformative impact of decarbonization policies by major gas buyers on the LNG gas market will largely depend on the specific policies and actions undertaken by individual countries and regions to reduce their carbon footprint and transition to cleaner energy systems.

References

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