Global LNG demand set for steady growth
30 August 2024
The low density of natural gas makes it costlier to contain and transport compared to other fossil fuels such as coal or crude oil.
For more than a century after gas was recognised as a viable energy source, producers were unable to utilise the fundamental infrastructure that facilitated international oil trade – marine transportation.
Prior to the development of liquefied natural gas (LNG) technology, the transportation of gas was limited to movement by pipeline. The development of LNG revolutionised the manner in which gas is transported and consumed worldwide.
The first experimental shipment of LNG was made from Lake Charles in the US state of Louisiana to Canvey Island in the UK in 1958, aboard the vessel the Methane Pioneer. Since then, with improvements in technology and cost efficiencies, LNG has become an internationally traded commodity, the demand for which has risen through the years.
LNG production and transmission
LNG is natural gas that has been reduced to a liquid state by cooling it to a cryogenic temperature of -160 degrees Celsius. Natural gas is converted to a liquid in a liquefaction plant, or train.
Train sizes tend to be limited by the size of the available compressors. In the early years of development, train sizes had capacities of about 2 million tonnes a year (t/y), and a greenfield facility would often require three trains to be economically viable.
Improvements in compressor technology in this century have made it possible to design larger trains, to benefit from economies of scale. In the early 2000s, Qatar’s state-owned companies Qatargas and RasGas, in partnership with Western companies such as ExxonMobil and TotalEnergies (which was known as Total at the time), started operating trains with capacities of 7.8 million t/y.
When natural gas is in a liquid form, it takes up approximately one 600th of the space it would occupy as a vapour. Reducing its volume and its weight by half makes it easier and safer to transport across long distances on specially designed double-hull ships or vessels.
In the final stage of transmission, LNG is offloaded from a marine jetty to cryogenic storage tanks at the receiving terminal. It remains at -160 degrees Celsius during this process.
Benefits and applications
A slew of benefits and applications in various industries has fuelled the growth of LNG in the global economy.
LNG produces 40% less carbon dioxide than coal and 30% less than oil, therefore offering lower carbon emissions.
The LNG liquefaction process also releases very little nitrogen oxide, a harmful greenhouse gas, and sulphur dioxide, which can cause significant damage to terrestrial and atmospheric ecosystems.
With an energy density 600 times greater than natural gas, LNG can be used as an alternative fuel for sectors such as shipping. This helps to reduce the carbon footprint of industries that are slower to decarbonise.
On the socioeconomic front, LNG sales have facilitated the economic progress of producer nations, as witnessed in Australia, Qatar and Nigeria. Consumer countries also get access to a source of affordable and environmentally sustainable energy.
Separately, investments in LNG – in the form of LNG infrastructure building, as well as the expansion of production facilities – spur economic growth and help to stimulate job creation.
LNG is primarily used as a major source for electricity generation in powering industries, households and social infrastructure.
The chemicals industry is also one of the largest consumers of LNG, where it is mainly used for steam production and for heating, cracking and reforming units.
In the transport sector, meanwhile, LNG is one of the foremost sources of fuel, particularly for marine tankers and heavy surface vehicles, due to its high energy density compared to conventional fuels, coupled with its low emissions.
In addition, in food manufacturing, LNG is used as fuel for intense processes such as the steaming and drying of food produce.
Buoyant demand outlook
According to Shell’s LNG Outlook 2024, the global demand for LNG is estimated to rise by more than 50% by 2040, as industrial coal-to-gas switching gathers pace in China, and as South and Southeast Asian countries use more LNG to support their economic growth.
Global trade in LNG reached 404 million tonnes in 2023, up from 397 million tonnes in 2022, with tight supplies of LNG constraining growth while maintaining prices and price volatility above historic averages.
Demand for natural gas has already peaked in some regions but continues to rise globally, with LNG demand expected to reach about 625-685 million t/y in 2040, according to the latest industry estimates.
“China is likely to dominate LNG demand growth this decade as its industry seeks to cut carbon emissions by switching from coal to gas,” says Steve Hill, executive vice president for Shell Energy, in the company’s LNG Outlook 2024.
“With China’s coal-based steel sector accounting for more emissions than the total emissions of the UK, Germany and Turkiye combined, gas has an essential role to play in tackling one of the world’s biggest sources of carbon emissions and local air pollution.”
Over the following decade, declining domestic gas production in parts of South and Southeast Asia could drive a surge in demand for LNG as these economies increasingly need fuel for gas-fired power plants or industry. However, these countries will need to make significant investments in their gas import infrastructure, Shell said in the report.
The Shell LNG Outlook 2024 also notes that gas complements wind and solar power in countries with high levels of renewables in their power generation mix, providing short-term flexibility and long-term security of supply.
Three stages of growth
UK-based consultancy Wood Mackenzie, in its global gas strategic planning outlook, identifies three distinct phases of LNG market growth in the coming decade.
First, it says that continued market volatility will remain for the next couple of years as limited supply growth amplifies risk.
The pace of LNG supply growth and demand across Europe and Asia provide both upside and downside risks. Uncertainty over Russian gas and LNG exports further complicates the matter, making 2025 a potentially tumultuous year for supply, and therefore for prices.
This phase could be followed by a major wave of new supply, ushering in lower prices from 2026, Wood Mackenzie says in the report.
A muted demand response to lower prices across Asia would undoubtedly draw out the market imbalance. Conversely, supply risks cannot be ruled out. An anticipated escalation of Western sanctions on Russian LNG threatens to impact the overall supply growth scenario, increasing the potential for a stronger-for-longer market.
Beyond 2026, as LNG supply growth slows, prices will recover again before a new wave of LNG supply triggers another cycle of low prices in the early 2030s, Wood Mackenzie predicts.
Much will depend on long-term Asian demand growth. Booming power demand and a shift away from coal makes gas and renewables the obvious choice.
However, if LNG prices are too high, Asia’s most price-sensitive buyers could quickly return to coal.
On the upside, delays or cancellations to the expansion of Central Asian and Russian pipeline gas into China will push Chinese LNG demand higher for longer.
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The scope includes the supply of generators and auxiliary equipment, Mitsubishi Power said in a statement.
MEED exclusively reported that the Japanese original equipment manufacturer had been selected to supply its gas turbines for the IPP project in November last year.
A consortium comprising the local Saudi Electricity Company (SEC) and Acwa Power and South Korea’s Korea Electric Power Corporation (Kepco) won the contract to develop the Rumah 1 and Al-Nairiyah 1 IPP the same month.
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The SEC, Acwa Power and Kepco team offered a levelised electricity cost (LCOE) of $cents 4.5859 a kilowatt-hour (kWh) for Rumah 1, and $cents 4.6114/kWh for Nairiyah 1.
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Photo credit: Mitsubishi Power (for illustrative purposes only)
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Riyadh takes the diplomatic initiative
2 April 2025
Saudi Arabia has been at the centre of regional diplomatic activity through the early months of 2025, positioning itself as an intermediary in the Ukraine conflict and at the forefront of engagement with the new regime in Syria.
The role of regional mediator is one that has in recent years been more closely associated with Qatar – particularly in relation to the Gaza conflict – and, on occasion, Oman.
Riyadh’s decision to throw its weight behind diplomatic initiatives is part of what Abdulaziz Sager, chairman of the Saudi-based Gulf Research Centre, has described as a “bold multi-alignment strategy”, which seeks to balance Riyadh’s economic and security concerns and its regional leadership ambitions.
Multipronged initiatives
The kingdom has gained plaudits for its efforts to resolve the Ukraine war in particular. Following his talks with Crown Prince Mohammed Bin Salman (MBS) in Jeddah on 11 March, Ukraine’s President Volodymyr Zelenskyy said: “Saudi Arabia provides a crucial platform for diplomacy, and we appreciate this.”
Zelenskyy added that he had “a detailed discussion on the steps and conditions needed to end the war” with the crown prince.
The previous month, US secretary of state Marco Rubio had said Saudi Arabia had played an “indispensable role” in setting up bilateral negotiations between Moscow and Washington to discuss the conflict.
Russia’s President Vladamir Putin has also praised the Saudi leadership for providing a platform for high-level meetings with the US and “creating a very friendly atmosphere”.
Whether all this leads to a lasting peace deal for Ukraine remains to be seen, but Saudi Arabia’s attitude to conflict may be coloured somewhat by its own experiences over the past decade in Yemen.
It is now 10 years since it launched a bombing campaign against Yemen’s Houthi rebels in March 2015, and the war has not gone as Riyadh had hoped, with the Houthis proving far more resilient than anticipated.
Saudi Arabia’s southern border has at least been relatively quiet since a truce took hold in 2022, but a comprehensive peace deal has proved elusive.
Riyadh has also been re-engaging in the Levant this year, in light of the new regime in Damascus.
The new Syrian president Ahmed Al-Sharaa travelled to Riyadh in early February, on his first trip abroad since taking power. Saudi Foreign Minister Prince Faisal Bin Farhan had been in Damascus a week earlier.
There are some key issues at stake for Riyadh. The regime of President Bashar Al-Assad had overseen the industrial-scale production of the amphetamine-type stimulant Captagon, much of which was smuggled into Saudi Arabia and other Gulf states. Saudi efforts to disrupt the trade – both at its borders and via lobbying of the Syrian authorities – had failed to stem the flow of drugs.
In addition, Hasan Alhasan, senior fellow for Middle East Policy at the International Institute for Strategic Studies, has pointed out that between 500,000 and 2.5 million de facto Syrian refugees are thought to be living in Saudi Arabia – a fact that gives Riyadh a clear interest in Syria’s stability, particularly if it wants to encourage them to return home.
“Saudi Arabia views the fall of the Assad regime as an opportunity to reassert its influence in the Levant,” he asserted in a recent commentary.
The ousting of Assad in late 2024 and the recent Israeli campaign against Hezbollah has also changed the situation on the ground in Lebanon, encouraging Saudi Arabia to reconsider its approach there too.
MBS hosted Lebanon’s recently elected President Joseph Aoun on 3 March. Following their meeting, Saudi Arabia said it would look again at allowing Lebanese exports to Saudi Arabia and letting its own citizens travel to Lebanon.
Manoeuvring around Trump
The Saudi diplomatic push may also be motivated by a desire to ensure that relations with Washington remain on a positive footing in the wake of Donald Trump’s re-election as US president.
At first, it appeared that the bilateral relations would follow a similar pattern to Trump’s first term.
In January, MBS said in a phone call with Trump that Saudi Arabia was planning to invest some $600bn in the US over the coming four years, which the US president suggested should probably be increased to $1tn. This echoed the signing of $460bn-worth of defence deals when Trump made Saudi Arabia his first foreign trip as president in May 2017.
Riyadh appears to have conceded to Trump’s higher figure, with the US president saying in early March: “I said I'll go if you pay $1tn to American companies, meaning the purchase over a four-year period of $1tn, and they've agreed to do that. So, I'm going to be going there.”
However, other aspects of the bilateral relationship are more difficult and less predictable. Trump had been pushing Saudi Arabia to join Bahrain, the UAE and Morocco in normalising relations with Israel, but in light of the war in Gaza and Trump’s own plans for the ethnic cleansing of Palestinians from the strip, that looks like a stretch too far.
Trump will nevertheless have been pleased by the decision by Saudi Arabia and the other members of the Opec+ bloc in early March to unwind some of the production restrictions they had voluntarily agreed.
From April onwards, the eight-strong group will start to bring 2.2 million barrels a day back onto the market over the course of 18 months. That fits in with Trump’s call in January, soon after taking office, for Riyadh and Opec to do more to help bring oil prices down.
However, that decision may also create fiscal challenges for the Saudi government, as any rise in production could be more than offset by lower prices.
Saudi Aramco has announced plans to trim its dividend payouts this year to $85.4bn – down from $124bn in 2024. These payments are a vital source of revenues both for the central government and for its Public Investment Fund (which holds a 16% stake in Aramco)
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MEED’s April 2025 report on Saudi Arabia includes:
> UPSTREAM: Saudi oil and gas spending to surpass 2024 level
> DOWNSTREAM: Aramco’s recalibrated chemical goals reflect realism
> POWER: Saudi power sector enters busiest year
> WATER: Saudi water contracts set another annual record
> CONSTRUCTION: Reprioritisation underpins Saudi construction
> TRANSPORT: Riyadh pushes ahead with infrastructure development
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Investing in Saudi Arabia’s infrastructure opportunities
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With a background in private banking and asset management, Edmond de Rothschild is an established player in infrastructure investment. Since launching its infrastructure platform in 2014, the firm has raised over $6.5bn, ranking among Europe’s top infrastructure debt investors.
The bank prides itself on a conviction-led approach. “We at Edmond de Rothschild are a company that has convictions. Private markets are not a broad, generalist approach for us; we adopt a highly focused strategy, particularly in infrastructure,” says Jean-Francis Dusch, CEO of Edmond de Rothschild Asset Management UK and global head of infrastructure and structured finance.
This strategic approach has allowed Edmond de Rothschild to establish itself as a key player in infrastructure finance, growing from a small team of fewer than 10 people in 2014 to one that has now raised billions in capital. “We decided to focus first on real estate, then private equity with very specific strategies, and finally infrastructure, where we maintain a global approach,” says Dusch.
Edmond de Rothschild initially engaged in advisory services for governments and private consortiums, providing expertise in project implementation. The firm’s work in the public-private partnership (PPP) space led to the development of a dedicated infrastructure lending platform. “In less than 10 months from the initial idea being discussed, we raised $400m. Fast forward to today, and we have now raised more than $6.5bn, positioning us as a major player in infrastructure debt,” says Dusch.
Saudi infrastructure
Saudi Arabia’s Vision 2030 has set the stage for significant infrastructure development, and Edmond de Rothschild is positioning itself to play a crucial role. “Saudi Arabia is already the largest infrastructure market in the region, and we see significant opportunities to contribute,” says Dusch.
A major part of Edmond de Rothschild’s approach focuses on debt financing rather than equity. “The platform I represent is dedicated to debt. There has been a lot of equity investment from the kingdom and the strong regional banks, as well as large global banks. However, as infrastructure investment accelerates, we anticipate a liquidity gap that we can help bridge,” says Dusch.
This is particularly relevant given Saudi Arabia’s ambitious infrastructure programmes. “With Vision 2030 driving development, the need for private liquidity will increase. Our goal is to provide that liquidity in a structured way, supporting sustainable capital structures while ensuring robust returns for investors,” he says.
To reinforce its commitment, Edmond de Rothschild has established a local joint venture in Saudi Arabia.
The firm takes a diversified approach to infrastructure, ensuring it remains at the forefront of evolving sector trends. “Ten years ago, infrastructure was primarily about transport and social infrastructure,” says Dusch. “But we have always believed it also includes renewable energy, digital infrastructure and decarbonisation efforts.”
The shift toward digital infrastructure has been particularly notable. “The rise of AI and data-driven technologies has increased demand for digital infrastructure. Sustainable data centres, fibre optics and digital connectivity are becoming key pillars of modern infrastructure investment,” says Dusch.
Edmond de Rothschild’s portfolio comprises a mix of greenfield and brownfield infrastructure projects. “As a project financier, our natural inclination is to focus on new projects. However, when managing
investor capital, we also look at brownfield projects that require modernisation. About 30% of our portfolio is greenfield, and 70% is brownfield,” says Dusch.This focus aligns with the evolving nature of infrastructure investment. “Assets need to be modernised,
especially in energy transition and digitalisation,” he says. “Many brownfield projects are still in a growth phase, so while they are technically existing assets, they require significant new investment.”Broader region
While Saudi Arabia is the focus, Edmond de Rothschild is also eyeing broader regional expansion. “Our goal is to develop a multibillion-dollar infrastructure programme in the region, as we did in Europe. The first step is Saudi Arabia, where we have strong local partners. However, we aim to expand our coverage to other GCC countries over time,” says Dusch.
We don’t need to do everything – we focus on areas where we can add real value
This approach mirrors the firm’s European expansion strategy. “In Europe, we started with a focused mandate in core markets and gradually expanded,” he says. “We plan to follow a similar trajectory in the Middle East, leveraging our experience and track record to drive growth.”
One of the critical questions for international investors is whether Saudi projects are investment-ready. “It’s a mix,” he acknowledges. “Like in Europe, large programmes are announced, and while not every project is immediately ready, there is a concrete pipeline of opportunities.”
Edmond de Rothschild sees particular potential in small to mid-sized projects. “The debt instruments we offer are currently more suited to small and medium-sized projects rather than megaprojects. However, as the market evolves, we anticipate broader participation,” he says.
Saudi Arabia’s infrastructure financing model is also undergoing a shift. “Previously, infrastructure was largely government-led with a first-generation PPP approach. Now, we are seeing more private sector initiatives. Europe has largely transitioned to private infrastructure development, and Saudi Arabia is following a similar path,” says Dusch.
Long-term commitment
With infrastructure demand growing across sectors, Edmond de Rothschild will remain selective with its strategy. “We don’t need to do everything – we focus on areas where we can add real value. That is what has made us successful, and that’s the approach we will continue in Saudi Arabia and beyond.”
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> UPSTREAM: Saudi oil and gas spending to surpass 2024 level
> DOWNSTREAM: Aramco’s recalibrated chemical goals reflect realism
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> WATER: Saudi water contracts set another annual record
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Is this the end for Middle East studies?
2 April 2025
Commentary
Edmund O’Sullivan
Former editor of MEEDThe arrest and proposed deportation of Columbia University student Mahmoud Khalil and sanctions against others involved in Gaza conflict protests at the Ivy League college in 2024 are a disaster for those involved. Whether or not deserved – the conversation still rages among political pundits – the crackdown’s wider implications for academic freedom continue to resound.
On 14 March, the White House ordered the university to tighten disciplinary and admissions procedures and end the independence of its Middle Eastern, South Asian and African Studies department or risk losing federal financial support.
It is a reminder of how much private US universities still depend on government money.
There are further threats to higher education’s financing from private donors, both in relation to the student protests and fresh scrutiny being directed towards the statements, lectures and published works of academic staff on Middle Eastern topics.
US state universities, which largely depend on public finance, are under the same pressure. And similar patterns can be seen in Canada and in the UK, where a Bristol University academic was sacked in 2021 following complaints about his stance against Zionism. Middle East specialists at universities worldwide are increasingly cautious about what they write and say.
And this is not only about contemporary matters. Anyone teaching Middle East history is obliged to cover the events leading to the 1917 Balfour Declaration and its ramifications. This could be tackled in the past provided that care was taken to ensure all versions of the event were covered. But that may now be impossible. Only one narrative is becoming acceptable.
Uncertain future
This may be a short-term storm that will eventually blow over, although that is unlikely. The war to control the Middle East narrative triggered by the 7 October 2023 attacks on Israel could even intensify if the fighting continues.
Balanced reporting on developments in the region is difficult to locate. Those seeking alternative perspectives are being driven towards the fringes of the media, though that too is under siege via online management and censorship.
All this raises profound questions. Is there any point attempting Middle East studies when it is impossible to talk about contentious moments in the region’s recent past without the threat of sanctions that could be career-ending?
Unless this issue is addressed, the discipline may lose its purpose in shedding light on recent events. Among the many victims of a new era of destruction, the demise of free-thinking Middle East faculties is one that we may in due course have the most reason to lament.
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Saudi Arabia’s growth trend heads up
1 April 2025
MEED’s April 2025 report on Saudi Arabia includes:
> GOVERNMENT: Riyadh takes the diplomatic initiative
> ECONOMY: Saudi Arabia’s non-oil economy forges onward
> BANKING: Saudi banks work to keep pace with credit expansion
> UPSTREAM: Saudi oil and gas spending to surpass 2024 level
> DOWNSTREAM: Aramco’s recalibrated chemical goals reflect realism
> POWER: Saudi power sector enters busiest year
> WATER: Saudi water contracts set another annual record
> CONSTRUCTION: Reprioritisation underpins Saudi construction
> TRANSPORT: Riyadh pushes ahead with infrastructure developmenthttps://image.digitalinsightresearch.in/uploads/NewsArticle/13578976/main.gif