LNG markets poised for rollercoaster year ahead - Rystad Energy’s Gas and LNG Special Market Update

With prices on the Netherlands-based Title Transfer Facility (TTF) above $15 per million British thermal units (MMBtu), Europe is soaking up spot cargoes while depleting storage inventories at the fastest rate since 2021.

Forward curves are pointing to elevated prices well into the northern hemisphere summer as market participants scramble to comply with European Union (EU) storage targets.

Heat waves in Asia or a Chinese industrial demand recovery could spark competition from Asian buyers.

Rystad Energy expects roughly 14.7 million tonnes of additional supply in 2025, mostly from North America and Africa, contributing to lower prices towards the end of the year.

Looming large is US President Donald Trump, whose trade and sanctions policies have the potential to deeply impact gas and LNG markets.

His opening salvo in a US-China trade war has been fired, with 10% tariffs on Chinese goods and retaliatory 15% tariffs on US LNG, while his stance on Russia remains unclear.

Here are nine major trends we see taking shape, as the year carries on:

China imports a record-high 80+ million tons of LNG

Last year saw China’s LNG imports reach around 77 million tons (Mt), trending close to the record-high of nearly 79 Mt in 2021, before the onset of the most severe period of the COVID-19 pandemic-related lockdowns.

China’s LNG imports rose more than 20% year-on-year (YoY) during the first four months of last year on the back of low spot prices.

While soft demand recovery, significant inventory build-up and rising spot prices slowed import growth thereafter, they did not prevent imports from climbing to their highest level since 2022.

Despite 2025 starting under very different circumstances – high spot prices and tank-top inventories – do not be shocked if China ends the year with yet another record-high propelled by the X-factor for Chinese demand recovery: the industrial sector.

Tepid industrial activity limited growth last year, but conditions may improve as the government’s stimulus measures could have a bigger effect this year in a bid to support domestic demand and boost the property market.

China’s manufacturing Purchasing Managers’ Index (PMI) – an important indicator of industrial activity – has rebounded to the expansion territory in recent months.

This could signal that the industrial sector has seen more recovery.

However, the success of domestic economic stimulus measures could be offset by a potential trade war with the new Trump administration in the US. China’s manufacturing activity was hit noticeably in 2019 with the onset of the first trade war, also brought on by Trump’s during his first term in the White House.

Rystad Energy’s base case scenario forecasts China’s LNG imports to reach more than 83 Mt in 2025 – greater than the previous record-high in 2021.

Another noteworthy development on the Chinese market has been the boom of LNG truck sales.

This has been driven by the strong price-competitiveness of LNG compared to diesel – the phenomenon has remained even until now.

Much still need to be monitored, whether the switch from diesel to LNG will continue in road transport this year and the incremental LNG demand and displaced liquids demand to which it translates.

Trump stays put on Russian LNG sanctions

Days before leaving office, the administration of Joe Biden tightened sanctions on Russian LNG by designating two operational liquefaction plants – Vysotsk LNG and Portovaya LNG – near St Petersburg.

Previous sanctions had only focused on preventing the expansion of Russian capacity.

US sanctions, at the time of writing, prohibited a combined 5.5 Mtpa of Russian liquefaction capacity from entering global markets – 2.2 Mtpa from those two operational facilities and 3.3 Mtpa from the first train of Russia’s flagship Arctic LNG 2 plant, whose construction was modified and completed but which failed to find buyers for its sanctioned cargo.

These volumes pale in comparison to Russia’s 17.4-Mtpa Yamal LNG and 9.6-Mtpa Sakhalin 2 plants ) but they exceed Germany’s entire 2024 LNG imports and are enough to transform a tightly-balanced market into an under-supplied one – and certainly enough to keep LNG prices elevated.

Trump found himself at a crossroads when he took office on 20 January: ease sanctions and look soft on Russia, or extend them to Yamal LNG and Sakhalin 2 and US allies Japan and the EU will mount the barricades.

Unless US sanctions turn into a bargaining chip for peace negotiations with Russia, Trump might hold off on tightening sanctions further until the next wave of capacity additions from North America and Qatar hits the market.

Meanwhile, Rystad Energy expects Trump to promote US LNG exports by other means including the threat of tariffs.

Japan and South Korea sign new long-term LNG contracts

Japan imported roughly 67 Mt of LNG last year and South Korea 46 Mt, making them respectively the second and third-largest LNG importers globally.

To ensure security of supply and reduce exposure to price volatility, especially during the summer and winter months when gas-fired power generation is critical, East Asia and especially Japan’s imports are dominated by contracted LNG volumes while spot purchases accounted for less than 17% of imports in 2024.

However, some significant contracts are near expiration: the 2.1-Mtpa contract from RasGas to South Korea’s Kogas ends this year and the 3.3-Mtpa contract from Wheatstone LNG to Japan’s Jera comes to an end in 2026. Some of the 8 Mtpa of Japanese contracts and 3.2 Mtpa of South Korean contracts that are set to expire by 2026 will likely be extended – but not publicly announced – to bolster security of supply.

However, it is possible that one or both of these countries may seek additional long-term contracts this year.

One factor reducing the urgency is the increased availability of competing electricity sources in 2025, especially nuclear.

Japan’s power sector will have 13% more available nuclear capacity this year compared to 2024 with the restart of Tohoku Electric’s Onagawa unit 2 and Chugoku Electric’s Shimane unit 2, meaning that each utility can save approximately 1 Mtpa of LNG consumption.

South Korea will have 22% more available nuclear capacity compared to 2024, so its natural to deduce that dependence on coal and gas-fired power generation will also decrease this year.

FID drought in the US set to end soon

Few expected an LNG final investment decision (FID) dry spell in the US – it currently stands at 570 days and counting – when NextDecade sanctioned its Rio Grande LNG Phase 1 in July 2023.

Regulatory uncertainty introduced by the decision of then-US President Biden to halt processing non-free-trade-agreement (non-FTA) export permit applications until the re-evaluation of the US Department of Energy’s (DoE) public interest criteria delayed many projects in the country. Trump lifted Biden’s pause on his first day in office by signing the executive order on “Unleashing American Energy”, which ordered the DoE to resume processing non-FTA export approvals.

Global LNG demand is expected to see continuous growth over the next 15 years, peaking in 2039 at more than 700 Mtpa (95.3 billion cubic feet per day [Bcfd]) – nearly double of the 2023 demand levels of 406 Mtpa (53.4 Bcfd).

Rystad Energy deems 10 pre-FID projects in the US and Mexico to be the most likely – those are classified as planned – and expects them to come online in the next decade to balance global markets.

Global LNG markets would face a supply deficit from 2033 without these 53 to 85 Mtpa (7 to 11.2 Bcfd) of additional US LNG.

With the arrival of the new US administration and the unambiguous demand for incremental US LNG, the question is not if the dry spell will end but when.

Multiple US LNG projects contend to be the first to take FID this year or next and stand to benefit from the US administration’s outspoken support for LNG exports.

Texas LNG and Rio Grande Phase 2 had already obtained the prerequisite regulatory approvals from the DoE and the Federal Energy Regulatory Commission (FERC), but the District of Columbia Circuit Court of Appeals vacated their FERC authorization.

With sufficient offtake agreements and a signed engineering, procurement and construction (EPC) contract, could Texas LNG ride on the new government’s coattails to take FID?

Proven developer Cheniere Energy has two horses in the race, with the Corpus Christi Midscale Trains 8 and 9 (2.98 Mtpa) and the 14-Mtpa Sabine Pass Expansion, both of which have hit or nearly hit their commercial thresholds.

Sempra Infrastructure’s 13-Mtpa Port Arthur LNG project just gained commercial momentum by signing a heads of agreement (HoA) with Saudi Aramco – this includes 25% equity in the project – and an EPC contract with Bechtel as recently as July last year.

Rystad Energy will publish a commentary in the coming weeks dissecting the progress and prospects of US and other North American LNG projects, sharing our perspective on which project is poised take FID before its peers.

TTF stays above $13 per MMBtu as Europe scrambles to replenish storage

European gas storage holds roughly 49 Bcm as of 31 January, which translates to a filling level of 44% compared to 83 Bcm and 70.3% at the same time last year.

Storage withdrawals in October 2024 (+155%), November (+90%) and December (+12%) far exceeded the 2023 levels.

The main culprit behind the fast storage withdrawals was elevated gas-for-power demand triggered by multiple ‘Dunkelflaute’ events – periods of no or low generation from intermittent renewables that haunted especially Central and Western Europe.

Concern over the depletion of underground storage has contributed to prices at the TTF exceeding $15 per MMBtu – as the past two mild winters have seemingly erased the memory of storage drawdowns during a normal northern hemisphere winter.

Rystad Energy’s outlook for the northern hemisphere’s winter foresees European underground storage drop to around 43 Bcm, which corresponds to a filling level of 39%, before recovering slight and marking around 48 Bcm or 43% at the end of the heating season in late March. Despite strong withdrawals, EU member states are on track to meet near-term storage targets for this winter, while injection targets for July (61%), September (72%) and November (90%) continue to support higher summer delivery prices compared to winter 2025/26.

Rystad Energy expects summer spot prices between $13 and $13.50 per MMBtu.

North American gas-fired power generation outlook surges on the back of data centers

US power demand increased by 2.7% year-on-year (YoY) to 4,121 terrawatt hours (TWh) last year.

US gas generation, with a growth of 3.5% YoY, outpaced total power demand growth and climbed to 1,870 TWh.

Rystad Energy projects gas generation to reach almost 2,000 TWh this year.

Despite negligible consumption today, data center build-outs emerged as a significant focus for North American gas producers, with incremental demand estimates ranging between 30 and 60 Bcm (3 to 6 Bcfd) by 2030.

US gas giant EQT even projects around 100 Bcm (10 Bcfd).

Consequently, planned US gas generation projects in the utility sector have almost tripled from 6 gigawatts (GW) in late 2023 to 17.5 GW in November last year.

In Canada, December 2024 brought news of plans to construct the world’s largest artificial intelligence (AI) data center within its relatively oversupplied gas basin, aiming to add 7.5 GW of gas-fired power over the next decade.

This year could see more projects added to the pipeline across North America.

South Africa takes FID on import facility

South Africa faces an impending ‘gas cliff’ in June 2028 as its sole gas importer – petrochemicals company Sasol – has announced the cessation of imports through the Mozambique-Secunda Pipeline (MSP) due to declining output levels from its Pande and Temane fields in Mozambique.

The looming deadline places immense pressure on South African authorities and industrial players – whose demand for gas comprises 90% of South Africa’s total gas demand – to source alternative supplies.

The most promising facility had been Matola LNG in Maputo, Mozambique, which could leverage South Africa’s existing import infrastructure – the MSP.

However, prolonged insurgencies in Cabo Delgado, Mozambique, forced TotalEnergies to protract its force majeure on the Matola LNG facility, thus making it unlikely to start operations in time to save South Africa’s industrial consumers.

There had been attempts by Karpowership – a Turkish builder of powerships – to install floating storage and regasification units (FSRU) for gas-to-power generation purposes in recent years.

However, all attempts failed without approval from the relevant environmental and grid-management authorities. Authorities are once again exploring import possibilities to avoid the dire economic consequences, and South Africa’s Transnet National Port Authority (TNPA) is on the hunt for a service provider to help forward plans for an LNG-import terminal at the Port of Ngqura.

Despite the less than confidence-inspiring history of LNG-import plans in the region, the sheer urgency could potentially propel the plans to the FID stage this year.

Across the African continent, Egypt is adapting quickly to its new reality as net importer.

The country, haunted by domestic production problems and rising demand within its borders, is set to receive the 5.75 Mtpa FSRU Energos Eskimo, under a 10-year lease, in the second half of this year.

The Energos Eskimo will initially support and then replace the Hoegh Galleon, which will head to Port Kembla, Australia, following the end of its interim charter in February 2026.

The Energos Eskimo will give Egyptian authorities much-needed breathing space to ensure sufficient LNG cargoes can be imported and regasified to meet the nation’s power needs, thereby alleviating pressure on Egypt’s grid and ideally mitigating summer blackouts.

Gas transit through Ukraine resumes

The move into 2025 meant the end of a five-year transit agreement for Russian gas through Ukraine, which supplied around 15.5 Bcm of gas to Europe in 2024 and equated to 4% of the total EU gas supply for the year.

Despite last-minute efforts by Slovakian Prime Minister Robert Fico to broker a deal for a continuation, nominations by the Gas Transmission System Operator of Ukraine (GTSOU) for the Sudzha entry point at the Russian-Ukrainian border have remained at zero since the start of this year.

Halted flows triggered flow changes at Central and Eastern European entry points.

Austria, which previously auctioned capacity through Arnoldstein from Italy and via Oberkappel from Germany, has been supplied from Germany, with flows roughly matching those previously received from Slovakia. Slovakia, where ZSE Group secured deliveries from Poland’s PKN Orlen for LNG delivered to the Klaipeda terminal in Lithuania, has halted flows to Austria and is so far supplied with gas from Hungary.

Rystad Energy previously discussed the possibility of a third party’s involvement in facilitating the gas transit through Ukraine, but we regard such a scenario as unlikely, given the reputational risks on the side of the European Commission.

However, Ukrainian interest in protecting pipeline infrastructures from war damage, in addition to political ripple effects following Trump’s inauguration last month, may once again open the door for gas transits through Ukraine.

In fact, Ukrainian pipeline capacity can be awarded by GTSOU in monthly or daily auctions to any party with a transportation agreement with the Ukrainian body, while the country’s Naftogaz can also act on behalf of a third party – as done for Russia’s Gazprom under the current agreement.

Given a replacement of Ukraine transit flows with imports from Germany and TurkStream , a full-year comeback of the Ukraine gas transit in 2025 could potentially replace up to 10 Bcm of European LNG demand.

A comeback would further reverse price premia for summer 2025 contracts, which flipped following added demand as a result of the EU’s 90% storage target for November this year.

Therefore, while acting bearish on current market sentiment, a comeback of the Ukraine transit would mean a ‘back-to-normal’ scenario, rather than turning the European market overall bearish.

Suppressed spot charter rates prompt 15+ steam carrier retirements

2024 saw spot charter rates collapse to around $13,000 per day as they decoupled from LNG prices and newbuild long-term charter rates, which still require more than $90,000 per day.

Suppressed spot charter rates are likely to persist as Rystad Energy expects nearly 90 new vessels to join the operational fleet this year.

This represents a capacity growth of 15% (including the Arctic LNG 2 fleet), whereas LNG production is expected to grow only 4%.

Spot charter rates kicked off this year by experiencing a perfect storm that caused two-stroke carrier rates to dip to $10,000 per day, pushing them from breakeven on operating expenses to making a loss.

Beyond the structural dynamic explained above, spot charter rates have been weighed down by reduced voyage distance as marginal Atlantic basin cargoes are overwhelmingly headed to Europe rather than Asia.

Persistently low spot charter rates are likely to accelerate the retirement of steam turbine carriers, and elevated LNG spot prices ascribe a high value to boil-off, making older, inefficient carriers even less attractive.

Last year saw a record number of sales for demolition and Rystad Energy expects a new record of 20+ retirements in the coming year, considering that steam turbine carriers account for 28% of the operational fleet and more than 70 are over 21 years of age.

Some older carriers with lower capacities are candidates to be converted into floating storage units or FSRUs, enabling LNG access in new markets.

Rystad Energy does not anticipate the spot charter market to rebalance until around 2027, when the next wave of new US supply ramps up.