Gas & LNG market outlook to 2030: key findings

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James Walker, Gas & LNG market analytics team lead, McKinsey Energy Insights
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In our latest Global Gas Market Outlook, we predict that natural gas will represent 23%—up from 22% in 2016—of the global energy mix by 2030. We also expect total natural gas demand to grow 1.4% p.a. from ~3,500 bcm in 2016 to ~4,300 bcm in 2030.

Together, the US, Middle East, and China will account for ~70% of incremental supply of ~800 bcma. Where LNG demand is concerned, McKinsey Energy Insights anticipates that nearly all growth will come from emerging markets or recent entrants. However, we highlight the need to consider the effects that market risk, demand stability, and potentially rapid decarbonisation in these areas could have on demand.

In our latest report, we dive deep into the discontinuities that could really swing the gas markets one way or another. For example, in China, the extent to which government targets on gas consumption are met could mean a 100 bcma variance in global gas demand by 2030. Renewables too have the potential to be a significant disruptor.

Through 2022, surplus LNG will drive high-cost, uncontracted production out of the market. US LNG is expected to be at the forefront, attempting to compete against Russian piped imports in Europe and traditional oil-linked supplies in Asia—although we suggest US LNG would struggle against Asian supplies if oil prices stay below ~USD52- 56/bbl.

Post 2023, the world will require new FIDs on liquefaction projects, the costs of which will drive long-term LNG pricing up to a point, and MEI expects the type of projects reaching FID to change dramatically.

The old paradigm of integrated mega-projects in LNG is being challenged. In the US in particular we have seen the decoupling of upstream and midstream which has improved project pacing and ability to finance new liquefaction projects. The most competitive liquefaction projects in the future are often expansion projects or brownfield projects. 

By 2030, an additional 175 to 210 bcm of new supply will be needed to meet demand. Assuming only the most economic new projects are built, MEI sees the price of the marginal unit of LNG growing to USD8–8.7/mmbtu in response. However, as nearly all LNG demand growth to 2030 comes from emerging market customers likely to be more price-sensitive, price increases may be more modest than many would expect.

The outlook was developed by MEI analysts with input from McKinsey & Company’s Global Oil & Gas experts after reviewing forecasting models from MEI’s Global Gas Model and Energy Demand Intelligence Model, as well as other proprietary data from MEI’s suite of oil and gas products. To download the report, click here.

Image courtesy of McKinsey Energy Insights