A wave of new liquefied natural gas projects that was supposed to flood the global market from next year now looks like it might not eventuate until at least 2026.
The main reason is that the buildout of new export plants across the US Gulf Coast is at risk of taking longer than expected. That means the current supply tightness — a hallmark of the market since Russia’s invasion of Ukraine in 2022 — will be around for a bit longer.
QatarEnergy’s Golden Pass LNG facility in Texas may miss its first-half 2025 start-up date due to a shortage of workers. And while Cheniere Energy Inc. said last week that its Corpus Christi expansion will start this year, traders are anxious about any hiccups.
The Arctic LNG 2 project in Russia, meanwhile, is likely to ship its first cargo to China this summer when ice levels in the Northern Sea Route recede. The plant is unlikely to operate at full capacity, however, as long as US sanctions remain in place.
And Australian exports are slated to drop next year due to legacy production declines, while Egypt and Indonesia are also contending with falling output and higher domestic consumption.
On the demand side, Europe’s LNG use in the summer of 2025 may rise more than 10% from 2024, according to BloombergNEF. Ukraine’s transmission system operator said it doesn’t plan to renew an agreement for Russian gas to transit through its borders when it expires later this year, cutting another source of supply to the continent.
Consumption in Asia also continues to rise. Emerging-market buyers are likely to be in the market when Asian prices fall below $10 per million British thermal units.
Expectations of a tighter 2025 are showing up in the futures market. The European benchmark contract for next year has jumped by around 17% since March, outpacing contracts for subsequent years.
Make no mistake — the LNG market will still be oversupplied later this decade. Qatar’s massive expansion is on schedule, while potential US project delays won’t last forever. But in the shorter term, be prepared for another year of heightened prices and volatility.
–Stephen Stapczynski, Bloomberg News
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