The LNG industry is experiencing significant growth, with several new buyers entering the market. There is also sustained capital availability for new supply projects and import infrastructure.
However, according to a report by Wood Mackenzie, the future pace of growth is not guaranteed. According to the report, one of the key concerns is the timing and scale of the next wave of LNG supply, which is essential to meet demand in the early 2030s. Up to 60 Mtpa of new supply faces potential obstacles.
In the US, the Rio Grande project by Next Decade is facing legal challenges concerning its Federal Energy Regulatory Commission authorisation. While Phase 1 construction continues, the court’s ruling could delay the project’s start-up and affect the final investment decision (FID) for Train 4.
This means that the Rio Grande LNG project will face delays. While construction on Phase 1, which includes three liquefaction trains, is ongoing, the court’s ruling will impact the rest of the project. This will delay the final investment decision (FID) on Phase 4 and could potentially affect the construction timelines for Phase 2 and Phase 3.
A more significant challenge lies in demand. Asia has been the primary driver of demand growth in the liquefied natural gas market. Currently, the outlook is positive, with Asian LNG imports rising by 15% over the first eight months of the year, according to the report. However, Chinese LNG imports are expected to decline as its gas storage nears capacity. If the upcoming winter is mild, these storage sites will not be depleted quickly, which could dampen overall regional demand.
Another factor affecting Asian demand is price sensitivity. While LNG prices have remained relatively affordable this year, fueling the surge in imports, Wood Mackenzie’s analysts caution that many Asian countries are highly price-sensitive. Should prices rise significantly, these nations may reduce their purchases, posing a risk to sustained demand growth.
Finally, there is the issue of emissions, which Wood Mackenzie predicts will become increasingly significant in the future. If other countries follow the EU’s lead in demanding low-emissions LNG, regardless of the cost, this will add pressure to the market. As stricter emissions regulations are implemented, the price of LNG is expected to rise accordingly.
