LNG

European LNG buyers fail to significant attract more deliveries although prices were much higher in the first week of 2025 than early last year. “There is a stickiness in LNG trade flows to Asia,” Energy Aspects said, referring to structural demand growth and heavy demand for spot cargoes from less price-sensitive markets like Japan and South Korea.

Analysts at the London-based consultancy found that Asian LNG demand has so far only been growing by 6.0 million tons year-on year y in 2025, which is down from 16.1 Mt growth last year. But Europe still stays very reliant on the increments in global LNG supply to meet its minimum storage targets by end-October.

A price-sensitivity analysis on how much Asian gas markets can call on spot and divertible supply at different price levels, found that at $10–20 per MMBtu, a $1/MMBtu rise, equal to €3.24/MWh, in TTF prices only weakens non-European demand by 0.89 million tons per annum (mtpa).

“European prices are already near the top of the coal-to-gas fuel-switching range and we already expect Europe to just meet its storage targets, so a market tightening of 5 bcm (for example, from cold weather in Europe and Asia over Q1-25) could propel TTF prices up by around €13.50/MWh,” analysts commented.

Quick drawdown on inventories

Europe entered January with gas inventories at just 79.2 bcm, or 73% full – a decrease by 15.3 bcm y/y which makes it difficult to rebuilt stocks before the end of the gas year in October.

The fast-paced drawdown during the months of November and December 2024 had a substantial impact, considering lower Russian pipeline gas deliveries were not sufficiently offset by higher LNG deliveries and low demand. The stockdraw amounted to 25 bcm over the past two months, while Russian pipeline gas deliveries were 5.3 bcm, down from the five-year average of 18.2 bcm, while LNG receipts were up marginally to 22.6 bcm.

Analysts project Europe stocks to hit around 40 bcm (37% full) by end-March, anticipating further reductions in Russian pipeline gas supply through the first quarter of 2025 and gradually rising gas demand.

The new US administration is pushing for deregulation and American energy dominance on global markets by fast-tracking permitting for LNG terminals and related infrastructure. Such policies are poised to boost oil and gas production and underpin US LNG export growth.

President-elect Donald Trump has already outlined a radical shift in US energy policies which is expected to spur investment in the upstream sector, as well as related pipelines to bring shale oil and gas from America’s major unconventional oil and gas basins to liquefaction terminals along the US Gulf Coast. Rising shale oil and gas production is bound to create a supply length and free up additional gas resources for liquefaction and export, as well as for the American downstream market, notably for the power gen and industrial sector, analysts at Rystad Energy reckon.

In his pro-energy agenda, Trump vowed to override and reverse Biden-era regulatory pauses on US LNG export projects and increase leases on federal land for fracking of unconventional oil and gas. If implemented, these policies could almost double US LNG export capacity from currently 11.3 billion cubic feet per day (Bcfd) in 2023 to 22.4 Bcfd in 2030 – especially if major projects like Texas LNG and Calcasieu Pass (CP2) move forward, analysts noted. CP2 attracted extra scrutiny from climate campaigners as the single largest LNG project proposed to date.

Such an expansion is deemed “crucial” for the United States to stay a major player in the global LNG market, where demand is forecast to reach nearly 600 million tons (Mt) in 2030. Based on currently producing and under-development projects, a supply gap of 140 Mt will materialize in 2035 – but considering the turn-around in US energy policy, Rystad Energy CEO Jarad Rystad is optimistic:

“We’re moving from a time of energy scarcity to a time of energy abundance,” he commented. Capacity additions in both fossil fuels and renewables will, in his view, outpace increases in demand in 2025.

Europe bargains for US LNG

Looking at the global supply picture, expanded US LNG production and exports could be used as a bargaining chip by the Trump administration in trade negotiations with Europe, Russia and other major economies in Asia.

“Europe is still searching for reliable, long-term alternatives to Russian piped gas and LNG supply, while China-US LNG trade is likely to be affected by tariffs,” said Rystad Energy’s head of North America Gas & LNG Research, Emily McClain.

European leaders have already hinted at using US LNG purchases as a bargaining tool to avoid potential trade tariffs under Trump’s administration. “By aligning energy policies and prioritizing US imports, Europe could secure a stable energy supply while fostering stronger transatlantic relations,” she suggested.

Trade tariffs 2.0 risk to push up energy prices

Trump has a legacy of levying trade tariff during his first administration which has been a great cause of concern about policy risks on the future cost of LNG and global trade. A 25% steel tariff, for instance – as implemented in 2018 –led to significant price increases for LNG projects. And this trend that could repeat under Trump 2.0.

Another trade war with China, meanwhile, could disrupt the flow of LNG between the two countries, just as it did in 2019 when LNG exports were halted. “Such tariffs would not only elevate capital expenses for LNG projects,” McClain warned, “[they would] also risk slowing contracting activity with key buyers like China, jeopardizing long-term export growth.”

On the other hand, there is a risk of oversupply on global LNG markets especially if multiple new US LNG projects move forward simultaneously. An oversaturated market could erode prices, disadvantaging US producers compared to competitors like Qatar and Australia, analysts noted. But reliable US supply would also unlock new demand, particularly from price-sensitive markets in Asia – if executed strategically.

Taiwan is one of the few markets in Asia where LNG demand is rising with a steady and substantial pace. Over 4.4 GW of new gas-fuelled power generation capacity is scheduled to start operations, underpinning LNG imports, while Taiwan’s law-making court is reviewing if the runtime of the final 951 MW unit at Maanshan nuclear power station can be extended.

Turkey’s incumbent gas importer BOTAS has issued a tender for delivery of five LNG cargoes in the first quarter of 2025 that will support the supply and demand balance in the EU gas market this winter. Analysts caution, however, Egypt’s new FSRU poses upside risk to non-European demand.

Juxtaposing the carbon capture and storage (CCS) capacity with LNG production illustrates of the scale of the ambition for CCS, Wood Mackenzie says, comparing the growth of two large industrial systems handling gas in a cooled liquid state. “Even in the delayed energy transition scenario, CCS capacity is expected to be three times greater than LNG supply volumes by 2050," analysts noted, "while in the base case, it will be four times greater."

LNG is a controversial topic in Germany: Green paint was thrown at the back entrance of Berlin’s luxury Hotel Adlon at the opening day of the Global LNG Summit while Stefan Wenzel, state secretary to Germany’s economy minister Robert Habeck spoke just prior to a panel with top executives from Cheniere Energy, ADNOC Gas, Shell and bp.

Sembcorp Industries has entered a Sale and Purchase Agreement (SPA) with Chevron to import up to 0.6 million tons of LNG per annum over ten years, starting from 2028. Sembcorp has two gas-fired cogeneration plants, producing 1,219 MW of electricity and 1,000 tonnes of steam per hour on Jurong Island, where a hydrogen-ready plant is also under development.

Prices at the Dutch Title Transfer Facility (TTF), Europe’s most liquid gas trading hub, have risen due to a growing risk premium related to residual Russian flows or cold-weather events. The TTF Q1-25 contract is already pricing near the top of the coal–gas fuel-switching range in the power sector.

Growth in US LNG production is essential to balance global markets and provide emerging Asia with an alternative to coal, the region’s dominant fuel for power generation. Wood Mackenzie forecasts LNG demand from Asia will grow from 270 million tons per annum (mtpa) this year to 510 mtpa in 2050 – and without resources to be self-sufficient, the region must rely on imported LNG to cover its energy needs.

As the world’s biggest LNG exporter, the United States has been essential to balancing global markets and providing electric power generators across Asia with an affordable and available alternative to the high-emitting coal. However, unless there is an upsurge of LNG supply from new projects, rising coal-burn across emerging Asia will cause a substantial rise in related emissions, a study commissioned by the Asia Natural Gas & Energy Association (ANGEA) finds.

Two scenarios were modelled: one where the current halt to U.S. LNG export approvals to non-free trade agreement countries is lifted early in 2025 and another where this ‘pause’ stays in place longer-term.

“If the pause is lifted and approvals and development of export facilities resume, then U.S. LNG is expected to comprise a third of global supply by 2035,” said ANGEA chief executive Paul Everingham. “But if it remains in place and planned and proposed U.S. LNG projects are not developed, there is a risk that LNG developments in other regions will fail to keep pace with anticipated demand growth.”

Though considerable LNG supply will come to the market in the second half of this decade, uncertainty abounds about the 2030s and beyond. This supply risk is impacting energy planning in Asia.

Speaking to energy decision makers around Asia, who plan to invest tens of billions of dollars in gas supply and infrastructure worth, ANGEA found the most common question they ask us is ‘where is our gas supply for future decades going to come from?’

Bangladesh, Vietnam, the Philippines, Indonesia and Malaysia will not be able to realize their plans to transition to gas-fired power if LNG prices are high and coal use, which hit record levels in both 2022 and 2023, will keep growing. “They want to know if the U.S. will be a reliable long-term supplier of the LNG they seek to replace coal in power generation,” he explained.

“If it’s not from the U.S. or Australia, then this study shows gas would need to be sourced from less cost-competitive projects around the world and the likely outcome would be higher LNG prices than what many South Asian and Southeast Asian nations can afford.”

And their fallback position is – quite understandably – to stick with a fuel they are familiar with and which they know is likely to be inexpensive and plentiful: coal.

“If price increases were to result in 2035 LNG demand from the emerging Asian importing countries being 30% lower than Wood Mackenzie’s current projections, it’s estimated an additional 95 million tons of coal would be used in that year alone,” Everingham concluded.

Spot and forward LNG prices indicate the supply/demand balance will tighten in December and going into the first quarter of 2025. Following two exceptionally mild winters, markets are currently well supplied at relatively low prices, analysts said, hence a prolonged spell of cold temperatures could squeeze the balance substantially and cause price spikes.