Navigating the future of LNG: Strategy, supply and global demand shift

Once considered a nuisance byproduct of coal and oil production and long used primarily as a source for artificial lighting, natural gas has emerged as perhaps the most important commodity for meeting future global energy needs. With significant growth in shale development and pipeline infrastructure, natural gas powered about half of US electricity in the summer of 2024.¹ Over the past two decades, natural gas has also played an important part in reducing US emissions—notably by surpassing coal as a fuel source for electric power.² But what has made the commodity truly global is the rapid expansion of liquefied natural gas (LNG).

By 2040, most of the world’s long-distance natural gas trade will move via LNG rather than pipeline.³ The growing LNG supply means more liquidity, competition and optionality in an increasingly global natural gas market. Gas will trade like oil, with global market forces determining supply flows and regional price indices converging. Local gas markets will increasingly import global risks and volatility, leaving unhedged traders vulnerable to unforeseen price shifts.

Let’s review the global supply and demand outlook for LNG (including the potential impact of geopolitical risks), examine trends in contracting and financing options, and highlight various operational constraints for the global LNG market. We’ll conclude with strategic priorities that LNG participants — producers, buyers and traders — can set now to realize the opportunities posed by LNG while mitigating potential risks.

Demand growth

In 2024, global natural gas consumption rose by over 2.8% to exceed 4,200 billion cubic meters, with the Asia-Pacific region accounting for nearly 45% of the growth due to industrial expansion and decarbonization efforts. Countries like Germany, Poland and Vietnam are enhancing LNG infrastructure to boost natural gas access. Meanwhile, rising electricity demand—driven by the rapid expansion of data centers fueled by AI and cloud computing—could represent up to 12% of US power by 2030, up from 3 to 4% today. Forecasts are likewise for increased demand globally based on growth in AI. But some upstream leaders believe LNG will be a greater source of demand than that driven by data centers.

Geopolitical factors and future LNG demand

There are a couple of ways in which geopolitical dynamics may dampen future LNG demand:

Supply growth

To meet forecast demand, Qatar has planned the North Field expansion project, which aims to boost output from 77 to 142 million tons per annum (mtpa) before 2030, an 85% increase. Yet North America remains dominant in providing LNG for global consumption.

Canada is ramping up supply with the LNG Canada project, projected to add 14 mtpa by 2025, primarily serving the Asian market. Mexico is also looking to join the LNG exports market with the Energía Costa Azul facility, further integrating North America into the global supply chain.⁵

Contributing almost 25% of global natural gas, the US continues to expand export infrastructure, with major projects like Plaquemines LNG in Louisiana and Corpus Christi Stage 3 in Texas, which are expected to boost global supply significantly.

The US upstream shale gas market is poised for strong growth over the next decade, driven by the Haynesville and Permian basins, which benefit from proximity to Gulf Coast LNG terminals and expanding pipeline infrastructure. Relatively stable low prices along with abundant shale supply and improved infrastructure can create significant arbitrage opportunities for US LNG exporters. Recent upstream consolidation can enhance efficiency and resilience to price volatility. The ability of US producers to deliver low-cost LNG to global markets efficiently can strengthen their competitive edge and consolidate the US' role as the world’s leading LNG exporter in an increasingly interconnected global energy market.

In response to LNG market uncertainty, contracting trends are shifting toward greater flexibility, optionality and diversification.

• The share of LNG contracts with destination flexibility has grown significantly.
• Portfolio players—intermediaries who buy under long-term deals and often sell spot or short-term—now represent a larger portion of contracted volume, offering added supply adaptability.
• Although more than 80% of contracts remain long-term (10 years or more), there’s a move toward more pricing diversity, with oil-indexed contracts declining in favor of hub-indexed pricing as oil and gas prices decouple.

Flexible offtake agreements help buyers to better monetize their positions, while rising spot market activity is prompting LNG stakeholders to adopt more sophisticated risk management and hedging strategies, which in turn will require better systems and risk models.

Financing new LNG projects involves a mix of traditional project finance, equity investments and debt instruments, with project finance—backed by long-term sales contracts—remaining dominant. Equity contributions from energy firms, utilities and global investors help share costs and risks, while developers increasingly use bond markets for refinancing. Emerging trends include:

• Sustainability-linked and green loans, incentivized by emissions reduction goals and supported by carbon capture efforts.
• Government support (e.g., tax relief, loan guarantees), as seen in projects in Canada and Mexico.

New market entrants are adopting innovative strategies and alternative funding models, especially for floating LNG projects. The evolving financing landscape reflects a shift toward sustainable, flexible and policy-aligned approaches to support the growing LNG industry.

Global regasification capacity

Global regas capacity exceeds current levels of LNG trade and is forecasted to grow. China leads the pack in Asia, with emerging markets in India, Vietnam, Philippines and Thailand. But some LNG regasification projects in Asia are threatened by delays or cancellations. Bottlenecks in LNG regas infrastructure could lead to the possibility of demand catching up with capacity.

Although the number of high-capacity terminals has remained flat globally, the number of terminals with regas capacity 1-10 bcm increased 72% from 2019 to 2024.

Western Europe rushed to increase regas terminals to offset the loss of Russian gas. The region is expected to continue increasing its import capacity, with 19 additional import terminals planned to be operational by 2030. Capacity may well exceed demand in the long term.

Europe has also invested in floating storage and regasification units (FSRUs). FSRUs are also being used in Mexico and Latin America to provide natural gas to areas not served by pipelines.

Shipping constraints

LNG spot charter rates spiked to $200,000/day in late 2022 due to surging European demand amid the Russia-Ukraine conflict, prompting a wave of new vessel orders that could boost global LNG shipping capacity by as much as 50% by 2030. But that rapid fleet expansion risks oversupply, with some projections indicating shipping capacity may exceed LNG production by 25%, potentially lowering vessel utilization and pushing charter rates down—already seen in the current drop to $30,000/day.⁶ Nevertheless, longer shipping routes, particularly from the US to Asia, Panama Canal congestion and geopolitical uncertainties around Arctic and Qatari LNG may sustain upward pressure on rates. To manage volatility, producers are increasingly turning to long-term charters, though the growing spot market continues to attract new players at the cost of higher rate exposure.

As the market evolves, LNG players should deal with shifting trade dynamics, fluid geopolitical risks, infrastructure constraints and emerging demand drivers. Strategic investments in supply expansion and logistical solutions can be crucial for capitalizing on the growing demand for LNG.

By focusing on the strategic priorities below, LNG market participants can move from reactive management to proactive leadership. In doing so, they will be well-positioned to shape the next era of global energy.

Sources

¹_{US Energy Information Administration, October 8, 2024. U.S. natural gas-fired electricity generation set new daily records in summer 2024.}

²_{US Energy Information Administration, April 25, 2024. U.S. Energy-Related Carbon Dioxide Emissions, 2023.}

³_{International Energy Agency, November 2017. World Energy Outlook 2017.}

⁴_{Russell, C., May 13, 2025. Trade truce won't resurrect China's imports of US energy, Reuters.}

⁵_{US Energy Information Administration, September 3, 2024. North America’s LNG export capacity is on track to more than double by 2028.}

⁶_{Global LNG Hub, October 2024. LNG charter rates collapse due to capacity overhang.}