LONDON, Feb 25 (Reuters) - Global liquefied natural gas (LNG) trade will rise 11 percent to 354 million tonnes this year as new facilities increase supplies to Europe and Asia, Royal Dutch Shell said in an annual LNG report on Monday.
Shell, the largest buyer and seller of LNG in the world, said trade rose by 27 million tonnes last year, with Chinese demand growth accounting for 16 million tonnes of those volumes.
Shell's forecasts, which see LNG demand climbing to 384 million tonnes next year, reflect a burgeoning industry with new production facilities opening in Australia, the United States and Russia and more countries becoming importers by constructing receiving terminals.
Asia dominates the market with Japan remaining the top buyer. China became the second largest in 2017 as demand soared due to a government-mandated push for power stations to switch from coal to cleaner-burning gas to help reduce pollution.
Due to the uneven progress of developing liquefaction-export facilities on the one hand and regasification-import terminals on the other, many analysts see the global market becoming oversupplied if not this year then next year.
But most also see a supply crunch around the mid-2020s because, at the moment, there are not enough liquefaction facilities being planned, financed and built.
Such projects are underpinned by long-term supply contracts struck years in advance by their operators. Between 2014 and 2017 buyers were signing shorter-duration contracts for smaller volumes, making financing difficult to complete.
However, Shell said the duration of contracts signed last year had on average more than doubled to 13 years.
"A rebound in new long-term LNG contracting in 2018 could revive investment in liquefaction projects," Shell said. "Based on current demand projections, Shell still expects supplies to tighten in mid-2020s."
Spot trade amounted to 1,400 cargoes in 2018 which was close to 30 percent of the global market compared to 25 percent in 2017, Shell said. Spot trade, the buying and selling of cargoes for immediate delivery, signals a more flexible, mature market.
Reporting by Sabina Zawadzki; editing by David Evans