The rapid expansion of the U.S. liquefied natural gas (LNG) export industry is set to encounter significant challenges by the end of the decade. A surge in global LNG supply, driven by new projects in the United States and Qatar, threatens to create an oversupply in the market as early as 2024, which could lead to lower prices and reduced profit margins for American exporters.
The U.S. LNG sector is facing growing competition not only from international markets but also from domestic demand for natural gas, particularly for power generation. As the demand for energy increases, fueled by the rise of data centers and the reshoring of manufacturing, U.S. LNG exporters will have to navigate a complex landscape.
Supply Growth and Investment Trends
In 2023, U.S. LNG developers began approving new investments following a lift on the pause for new LNG projects. This pause was initially implemented by the Biden Administration but was removed under the Trump Administration. Significant developments include Australia’s Woodside announcing the final investment decision (FID) for the Louisiana LNG project, with plans to commence production in 2029.
Venture Global also made headlines in July by securing FID and closing financing of $15.1 billion for the first phase of its CP2 LNG project alongside the associated CP Express Pipeline. Additionally, Cheniere has committed to its Corpus Christi Midscale Trains 8 and 9, which will enhance its liquefaction capacity significantly. Once these projects are operational, the Corpus Christi LNG terminal is expected to exceed 30 million tonnes per annum in liquefaction capacity later this decade.
According to analysts at Wood Mackenzie, the increasing number of U.S. LNG projects could exacerbate the oversupply situation. By 2030, the combined output of the U.S. and Qatar is anticipated to rise sharply, with new U.S. facilities coming online and Qatar’s major LNG expansion projected to complete by 2027.
The International Energy Agency (IEA) reports that U.S. projects have accounted for 95% of all newly sanctioned LNG capacity this year, with only Argentina sharing the spotlight. Between 2025 and 2030, nearly 300 billion cubic meters of new LNG export capacity is expected to be introduced, marking the largest capacity increase in the history of LNG markets, excluding Russia’s Arctic LNG 2 project.
Market Outlook and Price Predictions
The anticipated influx of new supply is projected to shift the global LNG market from a balanced state this year to an oversupply of almost 50 billion cubic meters in 2024, and an even larger surplus of 200 billion cubic meters by 2030, as estimated by LSEG and reported by Reuters energy columnist Ron Bousso.
Despite these challenges, Wood Mackenzie analysts maintain that U.S. LNG remains an attractive investment. They argue that global demand for LNG will continue to rise, particularly as Europe seeks alternatives to Russian gas by January 2027. U.S. LNG contracts are viewed as commercially viable over the long term, attracting a growing pool of investors eager to capitalize on America’s LNG boom.
The higher export capacity is also expected to influence domestic natural gas prices positively. The U.S. Energy Information Administration (EIA) forecasts that the Henry Hub natural gas spot price will increase from an average of $2.91 per million British thermal units (MMBtu) in August to $4.30 per MMBtu next year. This rise in prices may incentivize domestic production, essential not only for LNG exports but also for meeting the increasing demand for gas-fired power generation linked to the growth of artificial intelligence and other technologies.
While the LNG industry may face competition from domestic sectors such as data centers for gas supplies, the overall outlook suggests that the U.S. natural gas market will remain robust in the face of new challenges. As the industry evolves, the balance between export growth and domestic demand will be crucial for determining the future landscape of U.S. LNG exports.
