A wave of new liquefied natural gas (LNG) export terminals is set to come online in the next few years, and it could have a significant impact on global gas prices.
The projects could face stiff competition from cheaper renewable energy and a resurgence of nuclear power, potentially creating instability in the market and putting some projects on shaky ground, analysts say.
By 2030, LNG supplies will increase by 67%, or 636 million tonnes per annum (mtpa), compared to 2021 levels ? enough to completely flood the global market.
Cheniere Energy CEO Jack Fusco warned, “What you have today is a trillion dollars worth of natural gas infrastructure being built around the world,” adding, “This is a long-term shift we are seeing with natural gas.”
Qatar is set to expand its LNG production by an additional 49 mtpa by 2027, while U.S. facilities are expected to add 125 mtpa (16.4 billion cubic feet per day) of capacity by late 2027, according to data from BTU Analytics, a FactSet company.
LNG prices surged last year as demand rose in Europe but quickly dropped off as customers pushed back against high costs and sought other energy sources.
This trend could continue. Wind and solar power market share has jumped to more than 10% in 2021 from 1% just the year before, according to the World Economic Forum.
Nuclear energy use is also set for revitalization in areas like Japan and France. Japan, for its part, aims to get up to 20% of its electricity from nuclear by 2030 (up from 7% last year), while France plans six new reactors before 2035.
Given these new developments, uncertainty looms around LNG demand after about 2027, when extra supplies could cause prices to fall.
S&P Global’s Michael Stoppard noted during a discussion about global gas strategy, “The industry’s biggest unknown right now concerns the medium-term damage done by high prices on demand.”
The Institute for Energy Economics and Financial Analysis shared similar sentiments when they said last month that due to elevated costs and volatility associated with LNG it had garnered a “costly and unreliable fuel” reputation which might jeopardize plans for further import terminals in Asia?the region with the highest forecasted LNG needs.