The Hindu: Published on 7th November 2025.
Why in News?
U.S. Liquefied Natural Gas (LNG) producers have signed near-record sales contracts in 2025, despite increasing liquefaction fees and fears of a global LNG oversupply. In the first 10 months of 2025, the U.S. locked 29.5 million metric tonnes per annum (mtpa) worth of LNG contracts—four times higher than all of 2024—signaling strong global demand amid shifting energy dynamics.
Background:
Post-Ukraine War Energy Realignment:
Since Russia’s invasion of Ukraine in 2022, many countries—especially in Europe and Asia—have sought alternatives to Russian gas, turning to U.S. LNG as a stable and geopolitically safer option.
Pro-Oil and Gas U.S. Policy:
With President Donald Trump’s return to office in 2025, the U.S. has lifted the moratorium on new LNG export projects (imposed under Biden), promoting LNG exports as part of energy diplomacy.
Energy Demand Surge from Data Centres & AI:
Growing electricity demand from AI-driven data centres and Asia’s ongoing shift from coal to gas has boosted long-term LNG demand expectations.
Key Developments:
Contract Boom:
29.5 mtpa of new LNG sales and purchase agreements (SPAs) signed in just 10 months of 2025 — the second-highest annual total after 2022.
Fee Surge:
Liquefaction fees have risen by about 15% over two years due to inflation and supply chain pressures.
Venture Global: $2.30 per mmBtu
Cheniere: $2.75+ per mmBtu
Woodside: ~$2.90 per mmBtu
(2023 average: $2 per mmBtu)
New Capacity Addition:
61.5 mtpa of new capacity sanctioned this year, adding to an existing 120 mtpa base.
The U.S. could double LNG capacity by 2029 and supply one-third of global LNG by 2030 (IEA estimate).
Major Developers:
Cheniere Energy, Venture Global, Sempra, Next Decade, Woodside Energy.
Challenges:
Rising Construction Costs:
Inflation, tariffs, and labour shortages have increased project costs by up to 20%.
Major projects like Golden Pass (Exxon + Qatar Energy) and Plaquemines LNG (Venture Global) are overbudget and delayed.
Fear of Global LNG Glut:
With new U.S. and Qatari supplies entering the market, the IEA and Total predict potential oversupply and lower prices in the late 2020s.
Financing Risks:
As prices may fall, securing long-term buyers becomes crucial for ensuring return on large-scale LNG investments.
Economic & Strategic Implications:
For the U.S.:
Strengthens America’s position as the world’s top LNG exporter.
Supports domestic gas producers and employment in energy infrastructure.
Boosts geopolitical leverage, especially with Europe and Asia.
For Importing Nations:
Offers energy diversification away from Russia and the Middle East.
Long-term contracts ensure energy security but lock buyers into higher fees.
For Global LNG Market:
Potential price correction (downward) as supply expands.
Enhanced competition between U.S., Qatar, and Australia.
Growth in LNG trading and arbitrage opportunities.
Industry Reactions:
Optimists (“Bullish on Demand”):
Executives like Woodside’s Meg O’Neill and Venture Global’s Mike Sabel foresee sustained LNG demand growth, driven by AI data centres and Asia’s power needs.
Cautionary Voices:
Analysts like Alex Munton (Rapidan Energy) warn the “bull run” may not last forever as high costs and future low prices could stall new project approvals.
Future Outlook:
Short Term (2025–2027):
Strong LNG export growth with high fees and robust demand from energy-hungry economies.
Medium Term (2028–2030):
Global LNG supply expansion from U.S. and Qatar may trigger price softening and margin compression.
Long Term:
- Short term (2025–2027): Continued growth in LNG contracts and exports.
- Medium term (2028–2030): Global prices likely to fall due to excess supply.
- Long term: Gas demand from data centers and power generation will balance demand.
