Uncertain faith: investors express doubts about Shell's optimistic LNG predictions
In the dynamic world of energy, predictions and forecasts are a constant. Recently, Shell, one of the world's leading energy companies, has increased its forecast for global LNG (Liquefied Natural Gas) demand, predicting a 60% rise by 2040. This surge is expected to be driven by economic growth in Asian markets, the decarbonisation of high-emitting industries, and the global shipping industry.
However, not everyone shares Shell's optimism. The International Energy Agency (IEA), a leading voice in energy policy, predicts an oversupply of LNG by the end of the decade. This prediction is more bullish than last year's forecast of a 50% rise. The IEA's forecast is based on the "largest wave" of new LNG export capacity ever, with around 295 billion cubic metres per year expected to come online by 2030.
This potential oversupply has raised concerns among some investors, including Brunel, Greater Manchester Pension Fund, Merseyside Pension Fund, and the Australasian Centre for Corporate Responsibility (ACCR). They argue that Shell's LNG demand forecast does not appear to have accounted for this oversupply, making the company highly exposed to value erosion if prices are lower than anticipated.
Moreover, these investors have also pointed out that Shell's LNG demand outlook has not been materially revised in response to major changes in the global energy market, such as the rapid increase in renewable energy capacity. The IEA's latest Global Energy Outlook, presented in late 2024, does not seem to have addressed these concerns either.
Shell, however, remains confident in its LNG demand forecast. The company has more uncontracted LNG than any other independent oil and gas company, which suggests a strong belief in the long-term demand for the fuel.
The IEA's prediction of an LNG oversupply does not necessarily mean a decline in LNG trade. In fact, the IEA reports strong recent growth in LNG trade, particularly spurred by European imports that surged 25% in the first half of 2025. The IEA expects Europe to import 26% more LNG in 2025 compared to last year, buoyed by demand for storage replenishment and seasonal factors.
As the world continues to grapple with the complexities of energy transition, the debate over LNG demand remains a crucial one. While there is alignment on demand growth in principle, variations in pace and scale remain debated between Shell, IEA forecasts, and market participants.
This indicates a general expectation for LNG demand growth but tempered by uncertainties in economic conditions and supply developments. The upcoming Shell AGM on 20 May in London promises to be an interesting event, as investors and the company engage in discussions about these very topics.
Investors such as Brunel, Greater Manchester Pension Fund, Merseyside Pension Fund, and the Australasian Centre for Corporate Responsibility (ACCR) are questioning Shell's LNG demand forecast due to their concerns about a potential oversupply in the LNG market, which could erode the company's value if prices are lower than anticipated. The International Energy Agency (IEA) predicts an oversupply of LNG by the end of the decade, contradicting Shell's optimistic outlook for a 60% rise in global LNG demand by 2040.
The IEA's forecast for an LNG oversupply does not necessarily imply a decline in LNG trade, as recent growth in LNG trade, particularly European imports, has been observed, with a 25% increase in the first half of 2025 and an expected 26% more LNG imports in 2025 compared to last year.
