China's Weakening Appetite for LNG Threatens Global Supply

China's shift towards domestic and renewable energy sources has weakened its appetite for liquefied natural gas (LNG), potentially undermining the viability of future projects. According to analysts, China's LNG demand growth in the early 2030s is expected to be lower than previously anticipated, due to the country's drive to boost energy self-sufficiency.

The Iran war has triggered a second global LNG supply shock in four years, and China's response has been to prioritize domestic gas production and pipeline imports from countries like Russia. As a result, imported LNG is set to make up a shrinking share of China's fuel mix.

JPMorgan analysts have cut their projections for China's LNG demand growth by 14-22 million tonnes, while S&P Global Energy has reduced its expectations by 19-53 million tonnes. Shell's outlook sees imports peaking at 120 million tonnes by 2035 or near 150 million tons by 2040.

The weaker outlook for China's LNG demand erodes the need for up to 10% of new export capacity, which could affect producers' final investment decisions on new projects. Analysts warn that China's de-carbonisation and electrification efforts will impact LNG demand, leading to cancellations of projects with long-lead times and high development costs.