Results in 2024 suggest big opportunities are coming for LNG in 2025
GORDON FELLER, Contributing Editor
On Nov. 25, 2024, the U.S. DOE’s Energy Informational Administration (EIA) published a report entitled, “Global natural gas market may experience a tighter supply-demand balance this winter.” In that document, EIA said that “several issues could affect global natural gas balances this winter,” with the list of items including weather.
At the very top of their list is the situation regarding LNG supply growth: “We expect limited LNG capacity additions to come online this winter, mostly in the U.S.,” Fig. 1. Weather is always a factor, of course. Citing the fact that “El Niño changes to La Niña”, EIA warns that “this change in climate patterns may increase natural gas demand, creating competition for spot LNG supplies between Europe and Asia.”
The current position within the new, incoming Trump Administration is that prior Republican and Democratic administrations, alike, have made it clear that natural gas is a critical part of national security and an important climate solution.
Trump and his administration, and most especially the new Secretary of Energy nominee, Chris Wright, have stated their unfettered support for domestic natural gas and oil production. They argue that America’s vast energy resources are a strategic asset that can help keep U.S. prices low while supporting allies abroad.
Their criticism of Biden-Harris policies centered on the efforts to slow leasing on federal lands, slow new pipeline infrastructure, and slow investments across the hydrocarbon value chain. The Trump team argues that these policies hamper U.S. production while driving up prices. In addition, as energy prices are set by the global commodity market, the mere perception that production is being constrained often leads to higher prices, Fig. 2.
Some inside the White House and DOE, but not all, argue that the incoming Trump Administration should work with U.S. and European business interests to expand long-term commercial relationships needed to “green-light” additional U.S. LNG export capacity, European LNG receiving terminals, and associated pipelines on both sides of the Atlantic. Their goal is to have new “virtual Transatlantic gas pipelines” in place, as soon as possible.
Those same voices on the Trump team have argued that the DOE should immediately approve the U.S. LNG export applications still pending before it to export gas from the U.S. to willing partners and allies around the globe, with an urgent focus on the applications that have already been approved by the Federal Energy Regulatory Commission (FERC) or do not require FERC authorization.
Although FERC is an independent agency, the Trump team has been asking the commissioners to act on all pending U.S. LNG export facility and gas pipeline applications, to help move more natural gas to domestic customers and LNG export facilities.
Bloomberg’s Verity Ratcliffe reported in 2024 on the possible market impacts stemming from later-than-expected commissioning of LNG projects. She quotes Cederic Cremers, executive vice president for LNG at Shell Plc, who thinks that markets are less likely to be buffeted by massive amounts of new supply.
On the sidelines of the ADIPEC conference convened in Abu Dhabi, Cremers said that “the ramp-up won’t be quite so sharp with such a glut as people are saying. Maybe there will be a little bit of a softer landing in terms of how that supply comes on. The market is still quite tight. If you look at the supply additions, both last year and this year, they’re well below 10 million tonnes per annum (MTPA) on an annual basis. Everybody talks about the supply coming on but without necessarily realizing there’s quite a bit of catch-up work there because of the limited supply that’s come into the market over the last few years.” As it happens, global LNG demand is increasing year-on-year, and so project delays are effectively cushioning the impact of new supply on the market.
In September 2023, Bloomberg's Stephen Stapczynski reported that Shell Plc is exploring a number of LNG export projects in North America and Africa, “as the company expects strong demand for the fuel” during the energy transition. At the Gastech 2023 conference in Singapore, Cremers said that “there needs to be continued investment.” Stapczynski noted that the company is considering plans for activity after its current slate of projects and investments—which include a facility in Canada—start through 2030. Gas demand is expected to continue to grow for quite some time.
With its diversified supply sources, extensive shipping and storage assets, and access to regasification facilities, Shell plays a pivotal role in shaping LNG’s future. By leveraging its fully integrated model—from upstream production to trading—Shell is working to optimize market operations, offering flexible and reliable gas supplies to customers worldwide, while trying to enhance energy security.
LNG is central to Shell's strategy, reflecting its growing importance in meeting the world's energy needs. By 2040, Shell projects a more-than-50% increase in global LNG demand, driven primarily by strong growth in China, South Asia, and Southeast Asia. The transition from coal to gas in these regions underscores LNG's role in reducing carbon emissions. Additionally, LNG strengthens energy security and serves as a reliable complement to renewable power expansion in Europe, helping stabilize prices and bolster industrial competitiveness.
Shell has access to approximately 38 Mtpa of LNG production capacity through its 11 liquefaction plants. This portfolio is set to grow by a third, with an additional 12 Mtpa of capacity under construction and expected to commence operations later this decade. Complementing its equity production, Shell’s robust global trading network enables it to source third-party LNG, significantly boosting its market presence. In 2023, Shell’s LNG sales reached 67 million tonnes, up from 66 million tonnes in 2022.
Shell’s extensive experience and strong relationships with top LNG buyers position it as a trusted partner in the energy transition. The company has successfully delivered LNG to new markets, including Dubai, Jordan, Kuwait, Malta, Croatia, Gibraltar, El Salvador, Vietnam, and the Philippines, demonstrating its capability to navigate emerging market dynamics and deliver tailored commercial solutions.
One key area of Shell’s effort to innovate is in LNG bunkering. By establishing one of the world’s largest LNG bunkering networks, with operations at 26 locations across 12 countries, Shell is meeting the growing demand for LNG in marine transport. This development highlights the company’s proactive approach to fostering new applications for LNG and supporting global decarbonization efforts.
As one of the largest LNG shipping operators globally, Shell manages over 18 carriers and 65 on-time charters. Together, these assets account for approximately 11% of the global LNG shipping fleet, underscoring Shell’s logistical strength and operational efficiency in delivering LNG across the globe.
Shell’s acquisition of Pavilion Energy, expected to be finalized by the first quarter of 2025, marks another significant step in its growth strategy. With Pavilion’s contracted supply volume of 6.5 million tonnes annually, this acquisition will increase Shell’s LNG portfolio by over 9%. It also provides access to strategic gas markets in Asia and Europe, enhancing portfolio flexibility and adding material volumes to its operations.
Important research related to LNG’s future has been undertaken by Laurent David, the General Delegate of the International Group of LNG Importers. He found that “recent LNG market trends indicate a moderated global growth trajectory, with pronounced regional variations. Medium-term projections suggest the market may remain tight until 2026,” when new liquefaction facilities, particularly in the U.S., are anticipated to come online.
David points to the fact that, in 2023, global net LNG imports reached 52 Bcfd, “reflecting a modest 2.1% increase,” compared to the previous year (+5.6%), Fig. 3. In the first nine months of 2024, preliminary data show moderated global LNG trade growth at +1.4%, year-over-year, “with contrasting trends observed across different regions.”
David concludes that “Asia LNG demand grew 3% in 2023 and surged by 10% in the first nine months of 2024. In 2023, LNG imports in Asia showed contrasted evolutions, with a significant decrease in Japan (almost -10%) and a rebound in China (+11%). Price-sensitive importers like India (South Asia) saw a rise in imports (+10%), due to lower market prices.”
South Korea's imports dropped 4%, due to decreased gas consumption in power generation. Taiwan's imports remained stable. Thailand's imports rose to 11.6 MT, due to increased electricity sector demand. A year-on-year comparison between September 2024 and September 2023 shows that Chinese and Indian LNG demand are still dynamic, with respective 13% and 23% rises. David says that “in China, summer heat waves and increased LNG storage for winter preparedness have driven demand growth. Indian LNG demand has been boosted by petrochemical industry demand.
In contrast, David notes that Europe’s LNG imports declined sharply (-20%) in the first nine months of 2024, following a period of stabilization in 2023 after 2022's surge. After a 23% fallregistered in 2023 against 2022, the decreasing trend goes on in the United Kingdom, with a decrease of 55% against the backdrop of falling gas demand. David points to the fact that Spain has also kept its decreasing trend, with a 24% decline driven by reduced space left to gas-fired power generation as renewables keep on growing.
In terms of exports, the U.S. continued to drive growth as the largest LNG exporter (Fig. 4), reflecting what David calls “its sustained investment in liquefaction projects and an increase in production capabilities,” Fig. 5. Egyptian liquefaction plants (Atlantic basin) have halted their operations, as gas was needed for addressing domestic energy needs. David points out that “unexpected liquefaction outages introduced supply constraints in the first half of 2024, yet volumes from newly launched projects compensated for these gaps, stabilizing the market.”
Global regasification capacity expanded significantly in 2023, with over 8.5 Bcfd added through 17 new terminals. However, David notes that “liquefaction capacity grew only modestly, with only one additional train in Indonesia bringing only 0.5 Bcfd.” While downstream facilities have surged, upstream capacity has remained relatively constrained. For 2024, David estimates that “regasification should rise by almost 13 Bcfd” by the end of the year, while liquefaction should see a very limited increment of less than 1 Bcfd, Fig. 6.
Most of the incremental capacity will come from the U.S. over the next three years. David predicts this, because he thinks that “under construction projects” will “add 10 Bcfd on the current 12 Bcfd.” (Among these upcoming projects, Golden Pass’ operational starting date has been delayed to 2026 because of the bankruptcy of the EPC contractor).
The U.S. government's pause on pending approvals does not impact these projects that have Final Investment Decisions (FIDs) already taken. The impact on additional projects will depend on Trump’s moves, and/or on “how long the economic and environmental studies launched by the DOE will take, and on their findings.”
The other major incremental capacity that is under David’s lens “will come from Qatar, with North Field East new liquefaction trains currently under construction. Mozambique’s LNG project construction is still suspended, but the project promoter, TotalEnergies, has declared to be set to restart it.”
On the regasification side, the growth pace should flatten over the next five years, Fig. 7. Europe has welcomed new regasification terminals in Germany, Belgium and Greece during 2024. Most of the additional capacity in the Asia–Pacific region should be developed in Mainland China. Nevertheless, new capacities are expected in mature markets, such as Taiwan and South Korea.
Comparing the growth of regasification capacity with liquefaction, using the chart in Fig. 7, reveals a potentially tight LNG market through 2025. David notes that “with Asia’s rising energy needs and shifts towards cleaner fuel options, LNG demand is poised for continued strength, while the anticipated increase in liquefaction capacity, in the U.S. or in Qatar, from 2026-2027 onwards, may alleviate the current relative tightness.”
A different viewpoint is held by Stephen Goltz, Director of North American Energy Infrastructure at S&P Global Ratings. We asked him to share his insights about countries that are among the leading LNG sources: what do the most significant 2024 events/changes indicate for the 2025 outlook?
Looking at North America, Goltz and S&P expect “the pause on LNG that was implemented by the Biden administration will be removed,” especially given the outcome of the election. “This will remove the uncertainty for those projects that were subject to the pause and facilitate discussions with potential off-takers. Supply will see some increase with cargos from LNG Canada, which reached mechanical completion and are scheduled to come online in 2025, as well as some production from Venture Global Plaquemines and Cheniere’s Corpus Christi stage III project.”
As regards the DC Circuit Court’s decision on NextDecade’s Rio Grande project, Goltz thinks that this “will likely see resolution in 2025.” In addition, the rapid build-out of new U.S. data centers “will continue to affect the supply/demand dynamics of domestic natural gas, as LNG projects see increased domestic competition for natural gas. A number of projects have had timelines pushed out, so production that was expected to come on-line in 2025 will be (started in) 2027-2028.”
Goltz has examined countries that are leading consumers of LNG—what do significant 2024 events and changes portend for the 2025 outlook?
Goltz predicts that “the continuation of the Russia/Ukraine conflict will support demand for LNG in Europe, where almost half of the global cargos go.” However, he notes that “the EU, and particularly Germany, is well-supplied with a strong storage year, which will likely lead to reduced levels of importation of LNG by the EU.”
Goltz estimates that “there will be some incremental capacity coming online in 2025. However, more significant capacity (Rio Grande, Port Arthur, Golden Pass, Sabine Pass) is not expected to come online until 2027/2028.”
Goltz is not alone in his views. The assessment from Hector Casas Gonzalez, a principal with Arthur D. Little, is that Russia’s vicious war on Ukraine “has dramatically reshaped the LNG market—the U.S. has ascended from the third to the top exporter, while European imports have surged nearly 50%.” In his estimation, “even as mature markets like Europe and Japan reached peak gas demand, LNG is expected to remain a key player in meeting global energy needs, with consumption in developing countries projected to grow well into the 2040s and beyond.
Gonzalez takes into account China’s “ambitious plan to increase regasification capacity by 80 MTPA,” along with South and Southeast Asia, “where production is declining but demand is rising.” He concludes that these will be the main drivers of future LNG demand. Gonzalez notes the forces at work: “driven by demand in developing countries and new applications of LNG, such as maritime fuel, the next three years (2025 to 2027) will see an expected supply growth of 80 Mtpa, primarily led by the U.S. and Qatar. This marks the highest increase observed in any three-year period. Based on current capacity and the project pipeline, the U.S. could hold a 30% market share of the LNG supply market by 2030, accounting for 5% of total global gas demand.”
Related Articles FROM THE ARCHIVE
