In response to a shareholder resolution filed at its 2023 Annual General Meeting, Shell has published reports defending its liquefied natural gas (LNG) strategy and providing detailed demand forecasts. The resolution, backed by institutional investors including the Brunel Pension Partnership and the Greater Manchester Pension Fund, alongside the Australasian Centre for Corporate Responsibility (ACCR), called on the company to justify the assumptions behind its LNG plans and reconcile them with its climate commitments.

Shell's LNG Demand Forecast and Strategy

Shell forecasts robust long-term growth for global LNG demand. The company projects demand will increase by at least 54% by 2040, reaching between 610 and 780 million tonnes per annum (mtpa) from a 2025 baseline of 422 mtpa. An extended forecast to 2050 sees demand growing by at least 45% to 610 mtpa. Shell's strategy centers on LNG growth, with plans to increase its own LNG sales by 4-5% annually, leveraging a portfolio it describes as cost- and carbon-competitive and resilient through market cycles. The company notes its existing and new developments are positioned in the lower half of the industry cost curve.

Investor Concerns and Criticisms

The shareholder resolution and subsequent criticism from ACCR highlighted several key concerns regarding Shell's LNG strategy. Critics pointed out that Shell's demand projections are higher than all scenarios modeled by the International Energy Agency. They also questioned the lack of revisions to account for competing energy sources that could reduce LNG's market share. Specific shortcomings cited by ACCR include:

• A lack of detail on how LNG will outcompete other energy sources.
• Insufficient information on future industrial demand.
• An absence of data on LNG contracting for the period 2030-2035.
• Unclear pathways for how Shell will meet its 2050 net-zero ambition.

Furthermore, ACCR argued that Shell fails to address LNG's risks to energy security, citing recent geopolitical crises that caused price spikes and damaged LNG's reputation as a reliable, affordable fuel.

Market Outlook and Regional Demand

Shell's outlook identifies Asia as the primary growth engine, expected to drive approximately 70% of new gas demand through 2040. Conversely, the company acknowledges that demand in Europe and Japan has already peaked or will do so in the 2030s. Despite this regional slowdown, Shell contends that significant new investment in LNG supply will still be necessary in the 2030s and 2040s to meet even the lower end of its 2050 demand forecasts. The company postponed the publication of its annual LNG outlook report due to market uncertainty stemming from the conflict involving Iran.