Global LNG Market Braces for Unprecedented Supply Wave
The International Energy Agency (IEA) has issued a significant warning about the global liquefied natural gas market, indicating that a record wave of new supply is set to hit the market, but questions remain about where all this additional LNG will find buyers. This assessment comes from the IEA's recently published World Energy Outlook.
Unprecedented Capacity Expansion Creates Market Uncertainty
According to the Paris-based agency, global LNG capacity is projected to increase by approximately 50% by the end of this decade, representing the most substantial build-out in the industry's history. This massive expansion comes as suppliers and market analysts attempt to gauge the duration and severity of an anticipated market surplus, which could potentially weigh on prices for an extended period.
The IEA presented several scenarios in its outlook, each based on different assumptions about the pace of the global energy transition and the implementation of climate policies. In the most optimistic scenario for gas demand—known as the "current policies scenario"—global LNG demand would keep pace with the incoming supply until 2030 and might even slightly exceed currently planned export capacities by 2035.
Transition Policies and Competitive Risks Loom Large
However, under the more realistic "stated policies scenario", which assumes stronger growth in renewable energy sources, the market would face a significant LNG oversupply around 2030. This surplus would only gradually diminish, potentially lasting until approximately 2035.
This extended period of oversupply creates substantial risks for companies investing in new LNG projects. The United States, which is positioned to add the majority of new export capacity as the market's most flexible supplier, faces the greatest exposure to these market dynamics. Elsewhere, older LNG facilities with relatively high operating costs may struggle to remain competitive in a crowded market.
The IEA specifically highlighted China as a "wild card" for the global LNG market, noting the country's deepening energy ties with Russia—a major pipeline gas supplier—and ongoing uncertainty about the future trajectory of China's LNG import requirements.
The agency confirmed it had revised upward its overall gas demand projections in the latest World Energy Outlook, but emphasized that fundamental questions about the absorption of new LNG supplies remain unanswered, with much depending on the implementation of net zero policies and the actual growth rate of renewable energy worldwide.
