LNG supply shock tests gas demand as Shell forecasts long-term growth

The Iran war and disruption to Middle Eastern LNG supplies have weakened near-term natural gas demand, but major suppliers still expect consumption to grow over the longer term, OilPrice.com reported. Prices at four-year highs have reduced demand this year and encouraged European and Asian economies to turn more heavily to renewables and coal for electricity generation.

The supply squeeze has brought energy security back to the centre of government policy, following the 2022-2023 crisis. It has also intensified questions over gas demand growth as renewables take a larger role in power generation. OilPrice.com reported that gas has lost electricity market share in the UK, the Netherlands, Turkey, China, Japan and South Korea, citing Ember data referenced by Reuters columnist Gavin Maguire.

Ember’s analysis showed that gas’s share of global electricity generation fell for a fifth successive year in 2025, although the volume of gas-fired output increased slightly. Clean power, principally solar and wind, supplied about 68% of the increase in worldwide electricity demand over the five years to 2025, limiting the need for additional gas generation.

Of 124 economies producing electricity from gas, 61 had already passed their peak in gas-fired generation, according to Ember. However, those markets represented only about one-fifth of global gas-fired output in 2025. China’s gas share stayed near 3% despite strong electricity demand growth, while India and Brazil used gas primarily for a more limited balancing function.

Power generation is only part of the demand outlook. OilPrice.com highlighted gas’s industrial uses, including fertiliser production and supply chains for plastics, paints and synthetic fabrics. It also pointed to artificial intelligence and data centres as sources of additional electricity consumption, with gas expected to play an important role in meeting that demand in the US and much of Asia.

Shell’s LNG Outlook 2026 projects global LNG demand of nearly 700 million tonnes annually by 2050, roughly 65% above the 422 million tonnes recorded in 2025, according to OilPrice.com. Shell expects South and Southeast Asia to drive growth, despite the current Strait of Hormuz disruption. The company maintained that the long-term outlook remained strong, while stressing the need for further investment in both supply infrastructure and facilities serving demand.