IGU Sees 'Fragile' LNG Market Balance

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Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--Global capacity of liquefied natural gas (LNG) was supported largely by a new facility coming online in the U.S., though the market equilibrium remains "fragile," the International Gas Union (IGU) (London, England) reported.

LNG emerged as a fuel of choice after the Russian invasion of Ukraine in 2022 saw piped gas volumes to Europe diminish due to Western-backed sanctions. Supported by its vast natural gas reserves, the U.S. emerged to fill the void as the largest exporter of LNG.

U.S. potential increased last year when the Plaquemines facility, operated by Venture Global (Arlington, Virginia), received its first batch of feedgas in December. The company made a final investment decision on Plaquemines in 2022, and federal regulators in November gave the company permission to introduce natural gas into the export plant.

Plaquemines has a design capacity of 1.9 billion cubic feet per day (Bcf/d). A report from the IGU said Plaquemines helped support a net increase in LNG volumes last year. Subscribers to Industrial Info's Global Market Intelligence (GMI) Oil & Gas Plant Database can learn more from a detailed plant profile.

Australia and Qatar followed suit; when combined with the U.S., those three countries accounted for more than half of the global capacity increase. Issues with power, maintenance and mechanical outages, however, meant the worldwide utilization rates at liquefaction plants decreased slightly, from 88.7% in 2023 to 86.7% last year.

Meanwhile, IGU found that final investment decisions had declined "significantly" relative to 2023 levels, with the lowest annual volumes supported since the start of the COVID-19 pandemic in 2020.

Global prices last year were suppressed due to warmer weather and lackluster demand, harming investor appetites. Li Yalan, the IGU's president, said colder winter weather this year and a focus on refilling gas storage are driving prices higher.

"Meanwhile, the global LNG market equilibrium is fragile and sensitive to uncertainties from both supply and demand sides," she said. "In addition to these market and project dynamics, considerable uncertainty in geopolitics, trade, and regulatory policy characterizes today's energy landscape."

In the U.S. market, President Donald Trump overturned a pause on LNG projects enacted by his predecessor on environmental grounds to accelerate the domestic sector, despite an already-dominant position. He's working also to lower the regulatory burdens, though uncertain economic trade policies are creating broad-based economic jitters that could dampen demand.

In a separate report from early this year, the International Energy Agency warned that, with new projects coming onstream, there could be a supply overhang that could exist well into the 2030s.

Globally, the IGU said some of the key projects to reach a final investment decision last year came from outside the U.S., with the Ruwais LNG facility in the United Arab Emirates and the Cedar floating LNG project in Canada among the largest.

Despite some headwinds, IGU President Yalan said she was optimistic about the future of the industry.

"We ... believe that the growing demand for natural gas in emerging markets, the increasing diversification of market participants, the expansion of infrastructure, and the development of innovative technology will all continue to drive the LNG market," she said.

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 trillion (USD).