There are more and more LNG terminals in the world, but the demand for gas is slowing down

Alexey Gromov, Principal Director on Energy studies at the Institute for Energy and Finance, commented to the "Oil and Capital" Internet portal on the peculiarities of the global LNG market development.

Alexey Gromov said that the global LNG market is really in danger of a surplus, which will appear in 2025, and will rise to full growth in 2026-2027. However, it is important to take into account the specifics of the liquefied natural gas market. Unlike the oil and pipeline gas market, the LNG market is developing stepwise. And these steps depend on the commissioning of new terminals for receiving and liquefied gas production plants.

"We cannot focus only on the figure of a slowdown in demand in 2023. Moreover, although a number of countries now have excess LNG receiving capacity, in other countries, on the contrary, there is a desire to buy it, but there is no necessary infrastructure to ship such volumes.

Prices are another factor, and it is very inertial. In 2022, Europe bought LNG at insane prices, just so that the market would not collapse. It was then that a unique precedent arose, which had not existed before. Traders, including American ones, have deployed LNG shipments going to Bangladesh and Pakistan (according to indirect data, and to a number of other Asian countries), towards Europe. It was more profitable for companies to pay penalties for non—fulfillment of the contract, but to sell the cargo to the Old World," Alexey Gromov explained.

"Starting in 2026, the market will be in surplus. Maybe he won't be as strong. At least because the sanctions against the Russian Federation really slowed down the work of Arctic LNG 2, which planned to launch all three lines in 2026, but now only the first one is working, and there are no gas carriers to ship liquefied gas from it. Even the LNG project in Murmansk, which is less affected by restrictions, will not be launched until 2030.

But in general, the supply on the world market will grow. As soon as prices fall because of this, consumers (especially in Asia) will immediately increase demand. Even African countries will be involved in the process. South Africa, by the way, has already announced that it will actively switch from coal to LNG in the near future.

Such a stepwise nature will always haunt the LNG market. In South Asia, where the greatest demand is expected, and the market is highly regulated, the volume of demand for LNG will be strictly determined by price dynamics," the expert summed up.