LONDON - Global demand for liquefied natural gas (LNG) is expected to double to 700 million tonnes by 2040, with gas continuing to play a key role in a lower-carbon energy system, Royal Dutch Shell's annual market outlook said on Thursday.

Global LNG demand grew by 12.5% to 359 million tonnes last year. Asia is expected to remain the dominant region in the decades to come, with South and South-East Asia generating more than half of the increased demand, the report said.

"The global LNG market continued to evolve in 2019, with demand increasing for LNG and natural gas in power and non-power sectors," Maarten Wetselaar, integrated gas and new energies director at Shell, said.

"Record supply investments will meet people's growing need for the most flexible and cleanest-burning fossil fuel."

Natural gas emits between 45% and 55% fewer greenhouse gas emissions and less than one-tenth of the air pollutants of coal when used to generate electricity.

Last year, a record 40 million tonnes of additional supply became available to the market and there was record investment in liquefaction capacity of 71 million tonnes.

European imports increased by 74%, as gas was more competitive to burn than coal in the power sector.

Global LNG prices have fallen to record lows this winter as mild weather and the coronavirus outbreak in China reduced demand amid ample supply.

"While we see weak market conditions today due to record new supply coming in, two successive mild winters and the coronavirus situation, we expect equilibrium to return," Wetselaar added.

That will be "driven by a combination of continued demand growth and a reduction in new supply coming on-stream until the mid-2020s", he said.

In China, LNG imports increased by 14% last year due to efforts to improve air quality. LNG imports also grew in Bangladesh, India and Pakistan, the outlook showed.

(Reporting by Nina Chestney; Editing by Jan Harvey) ((nina.chestney@thomsonreuters.com; +44 (0)207 542 8071; Reuters Messaging: nina.chestney.thomsonreuters.com@reuters.net))