Float On – Coming Wave of LNG Supplies More Likely to Produce a Rising Tide Than a Cataclysm

Some of our art-loving readers may be familiar with the iconic image “Great Wave Off Kanagawa,” a Japanese woodblock that depicts three boats moving through a storm-tossed sea, with a large, cresting wave looming over them. Some LNG market observers have suggested that life is about to imitate art in the form of a massive wave of new LNG supply, emanating primarily from the U.S. and Qatar and expected to break on the shores of buyer nations worldwide over the next several years, resulting in economics bad enough to precipitate a pullback in LNG exports. In today’s RBN blog, we look at the latest projections and explain why the fears of oversupply and U.S. cargo cancellations may be exaggerated, and why the “great wave” some expect will more likely resemble a gradually rising tide.

The CEOs of TotalEnergies and Shell have recently expressed concern about the rapid growth in projected U.S. LNG exports and the negative impact that could have on the global market. They are worried that overproduction of LNG will lead to price declines in consuming markets and negatively impact the economics of LNG production, especially in the U.S. The International Energy Agency (IEA) expects global LNG nameplate capacity to rise by nearly 30 Bcf/d by 2030 (far-right column in Figure 1 below), led by the U.S. (blue bar segments) at 14.6 Bcf/d and Qatar (orange bar segments) at 6.3 Bcf/d, with the rest of the world (green bar segments) adding 8.8 Bcf/d. Note that the capacity additions are gradual, averaging less than 6 Bcf/d per year over the next five years. (Also note that only projects that have reached a final investment decision, or FID, are included in the Figure 1 data.)