Inside Shell’s LNG strategy: Can gas really anchor the energy transition?

Shell plc (NYSE: SHEL) has doubled down on its liquefied natural gas strategy in 2025, positioning gas as the cornerstone of its long-term energy transition plan. The oil and gas major forecasts that global LNG demand will surge by more than 60 percent by 2040—from around 407 million tonnes per annum (mtpa) today to between 630 and 718 mtpa within 15 years. As Shell accelerates its investments in LNG infrastructure and final investment decisions (FIDs) on new projects, institutional investors and climate advocates remain divided on whether gas can deliver both energy security and decarbonisation.

This story comes at a time when major producers are reconfiguring their capital allocation models to address the energy trilemma: delivering reliable, affordable, and low-carbon energy. Shell’s LNG strategy represents a pragmatic bet on global growth markets, particularly in Asia, while balancing shareholder returns and climate targets under growing scrutiny.

What is Shell’s long-term outlook for global LNG demand?

Shell’s LNG Outlook 2025 reaffirms the company’s belief that gas will play a foundational role in global energy systems through mid-century. Demand is expected to be driven largely by fast-growing economies in Asia, including China, India, and Southeast Asian nations, where gas is being introduced to replace coal, improve air quality, and support industrial resilience.

The liquefied natural gas portfolio remains the largest in the world, and Shell expects to grow its sales volume by 4–5 percent annually through 2030. On the upstream side, gas production is forecast to rise 1–2 percent per year, making it Shell’s largest source of energy over the next decade. This contrasts with many peer strategies that are pulling capital out of oil and gas to prioritise renewables.

While Shell continues to allocate capital toward biofuels, hydrogen, and EV charging infrastructure, it has deliberately pulled back from utility-scale renewable electricity. Only about 10 percent of its annual capital expenditure—roughly $3 billion—is currently directed toward renewables and energy solutions, compared to $10–12 billion reserved for gas and integrated upstream.

Why is Shell accelerating final investment decisions on new LNG projects?

In June 2025, Shell greenlit the Aphrodite gas project in Trinidad and Tobago, a move designed to stabilise feedgas supply to its 45 percent-owned Atlantic LNG facility. With first production targeted for 2027, Aphrodite is expected to produce up to 18,400 barrels of oil equivalent per day at peak, bolstering Shell’s export capabilities in the Americas.

The decision followed complications in Venezuela, where Shell had previously been relying on the Dragon field as a future source of LNG feedgas. U.S. sanctions were reimposed in 2024, blocking progress. This geopolitical setback has refocused Shell’s attention on projects within more stable jurisdictions, including expansions in Canada, Qatar, and Australia.

Shell has also reaffirmed its commitment to phase two of LNG Canada and is actively pursuing pre-FID work on the Crux project in Australia. According to internal forecasts, a 141 mtpa supply gap could emerge globally by 2040 if additional FIDs are not taken. Shell believes its early-mover advantage and operating scale place it in a strong position to benefit.

How are investors reacting to Shell’s gas-first strategy?

Shell’s renewed focus on gas has received both support and criticism. At the 2025 annual general meeting, over 20 percent of shareholders backed a resolution calling for improved transparency and alignment of LNG investments with net-zero ambitions. Groups like the Australasian Centre for Corporate Responsibility argue that Shell’s demand scenarios are inconsistent with Paris-aligned pathways.

Despite this, most analysts remain optimistic about Shell’s gas outlook. Some of them rank Shell’s LNG business as the strongest in the sector, citing its trading sophistication and long-term offtake agreements. Shell’s LNG division posted more than $10 billion in segmental earnings in 2024, even amid price volatility.

That said, concerns persist about margin compression, especially as new supply comes online from QatarEnergy, U.S. Gulf Coast operators, and Australia. Spot price weakness in Asian LNG deliveries is already prompting questions about the durability of Shell’s optimistic demand assumptions.

What risks could challenge Shell’s LNG growth trajectory?

One of the primary risks facing Shell is the growing volatility of global gas pricing, particularly in Asia. While demand is forecast to rise, affordability constraints in developing economies could erode uptake, especially if renewable alternatives scale more quickly than expected. Additionally, global LNG project costs have risen significantly, with Wood Mackenzie estimating average FID costs up 15–20 percent over the last 18 months due to labour, steel, and regulatory delays.

Shell is also exposed to geopolitical uncertainties, particularly in its Trinidad and Tobago operations and West African assets. The sudden shift in U.S. foreign policy in Venezuela last year triggered the loss of the Dragon development, a stark reminder that geopolitical volatility can derail capital planning.

Furthermore, Shell’s own production guidance for Q4 2024 suggested weaker-than-expected LNG trading results due to lower feedgas availability and reduced realised margins. This has triggered more cautious sentiment among short-term traders and tactical investors.

How is Shell balancing decarbonisation targets with gas expansion?

Shell has repeatedly emphasised that LNG plays a “critical bridge” role in the decarbonisation process. The company argues that LNG displaces coal in power generation, lowers lifecycle emissions, and supports grid stability when paired with intermittent renewables. CEO Wael Sawan has pointed to power shortages in Europe and parts of Asia as evidence that energy systems need flexible backup fuels.

At the same time, Shell is investing around $10–15 billion between 2023 and 2025 in low-carbon solutions. This includes building out hydrogen value chains, carbon capture and storage projects like Northern Lights in Norway, and expanding biofuels output in Europe and the U.S. Still, these segments remain relatively small compared to Shell’s gas-focused core.

Shell’s Scope 1 and 2 emissions fell by 11 percent year-over-year in 2024, but Scope 3 emissions from product use remain flat—an area where critics argue LNG growth undermines decarbonisation efforts. The company has not committed to absolute Scope 3 reduction targets, a key sticking point for ESG investors.

What comes next for Shell’s LNG strategy and energy transition role?

Going forward, Shell’s performance in the LNG space will hinge on execution of its Aphrodite project, successful expansion of LNG Canada, and the commercialisation of new long-term offtake agreements with Asian buyers. Regulatory clarity in markets like India and China could accelerate adoption, but policy delays would weigh on margins.

Institutional analysts are closely watching Shell’s capital deployment for signs of discipline and its ability to navigate between shareholder expectations and climate risk. With Brent crude holding above $75 and LNG demand seasonally rising in East Asia, Shell’s near-term outlook remains favourable, but longer-term alignment challenges persist.

Market watchers expect additional FIDs in 2025 and 2026 as Shell consolidates its LNG leadership. Whether gas remains the dominant “transition fuel” by 2030—or whether newer technologies like green hydrogen erode that claim—will define the trajectory of Shell’s energy identity for decades to come.