The Global LNG Market on the Threshold of Excess Supply

The Energy Policy journal of the Russian Ministry of Energy (No. 7 210. July 2025. Pp. 10-23) published an article “The Global LNG Market on the Threshold of Excess Supply” by Alexey Belogoryev, Research and Development Director of the Institute for Energy and Finance, on current trends and development prospects for the global LNG market in terms of the emerging imbalances in supply and demand.

Liquefied natural gas (hereinafter referred to as LNG) is playing an increasingly important role in international trade in natural gas, determining its physical and price dynamics. For many large gas consuming countries (all countries in South and East Asia except China; many countries in Latin America and Southeast Asia), LNG is the only source of import, which makes the physical and price availability of liquefied gas an important factor of gas demand dynamics both at the regional and global levels.

A test of adaptability

The very nature of the global LNG market has changed radically over the past 15 years. The number of LNG importing countries has increased from 23 in 2010 to 49 in 2024, and LNG has transformed from a commodity available mainly only to the richest countries into a relatively “democratic” energy source, imported on a regular basis even by countries with lower-middle incomes (India, Pakistan, Bangladesh, the Philippines, Vietnam, etc.). The market volume has grown by 84% compared to the 2010 level. China's share in global imports has grown from 4.3 to 19.4%, while Japan's share, on the contrary, has halved - from 32.2 to 16.3%.

The importance of spot and short-term trade has increased sharply - its share has increased from 18.9% in 2010 to 36% in 2024, including 30% of all trade now account for spot. The average terms of long-term contracts and the share of contracts with fixed delivery points have decreased. A significant portion of contracts, especially in Europe, have switched from oil indexation to linking to exchange indicators (TTF, Henry Hub).

Finally, we can talk about the merger of individual regional markets into a common global LNG market, which is expressed in the possibility of promptly redirecting supplies from one market to another and interregional price arbitrage.

A number of leading pipeline gas exporters are also major LNG suppliers: Qatar, the United States, Russia, Indonesia, Algeria and Norway. Other pipeline gas supplier countries, including Canada, Mexico and, under favorable conditions, Iran, also plan to start LNG exports in the 2020s. However, for many exporters, liquefied gas supplies are the only option due to their island nature, remoteness of sales markets or underdevelopment of the gas transportation system (Australia, Trinidad and Tobago, Oman, Brunei, Peru, etc.).

Tug of War

In terms of balancing international LNG trade, 2022–2025 resembles a tug of war: in 2022–2023, demand growth in Europe was possible due to reduced demand from Asian consumers. In 2024, Europe, on the contrary, was forced to sharply reduce LNG imports to balance its recovery growth in Asia. In 2025, the situation has again become a mirror image: almost all of the expected supply growth (+20-22 million tons/year) will be absorbed by the European market, which needs to replenish depleted reserves in underground gas storage facilities and compensate for the loss of Ukrainian transit of Russian pipeline gas, while imports from Asia, on the contrary, will stagnate after growing by 7% in 2024 due to a combination of a high accumulated base, relatively warm weather in the first quarter and an increase in average annual spot prices.

Demand Outlook

In the 2025–2030 period and probably, although less definitely, also in the 2030s, international LNG trade will steadily grow due to increasing demand for gas, primarily in countries that have no or limited access to alternative gas supply sources (domestic production and pipeline imports). Demand for LNG will be supported by the expansion of gas use as a transition fuel to low-carbon energy and the low level of saturation and gasification of new markets, primarily in China, South Asia and partly Southeast Asia. Due to this, by 2030, international LNG trade, according to average estimates, may increase in the baseline scenario to 600 million tons per year, i. e. grow almost one and a half times compared to the 2024 level.

The European market introduces significant uncertainty into the long-term dynamics of global LNG demand due to the EU plans to further reduce overall gas demand by 2030, as well as, although less likely, a partial restoration of Russian pipeline gas supplies in the event of a future improvement in the general political and economic relations between Russia and the EU or its individual countries.

However, even without a reduction in LNG imports by the EU and maintaining them at a high level until 2030, the global LNG market will face, according to our estimates, a multi-year period of excess supply. On an annual level, it will begin in 2026 (on a monthly level, possibly by the end of 2025) and will last until 2028–2029. The reason for the supply surplus will be the excess (outstripping demand needs) increase in production capacity based on investment decisions made in the late 2010s – first half of the 2020s.