At the height of summer, Europe had hoped that the coming winter would be its last difficult one to secure enough natural gas. By the middle of next year, liquefied natural gas was expected to turn into a buyer’s market, easing the squeeze the region has suffered since Russia invaded Ukraine. No longer.
After a series of project delays and stronger-than-expected demand for the fuel in Asia, the LNG market is set to remain tight next year and, probably, until mid-2026. The buyers won’t have the upper hand until early 2027 when new supply will finally arrive, potentially flooding the market for years to come.
The beauty of LNG is it can be loaded into ocean-going tankers. Gas shipped via pipeline remains in its gaseous state, limiting transportation options. The LNG market broadens how importing nations buy the fuel, opening the door to distant suppliers. For Europe, that means moving away from its typical suppliers of Russia, Norway, Algeria and Libya, all within pipeline distance, and reaching out to LNG sellers in the US, Qatar and Australia.
LNG liquefaction plants are multibillion-dollar marvels of engineering, often located in far-flung corners of the world. Even industry leaders — such as Exxon Mobil Corp., Shell Plc and QatarEnergy — often struggle with delays and cost overruns.
Call it the Murphy’s Law of the LNG industry: Any project that’s scheduled to be built on time will be delayed — always. With its corollary: If there’s a particularly bad time to reveal the delay, the announcement will happen exactly at the worst possible time.
For long, the LNG market was a relatively quiet corner of the energy sector, dominated by long-term contracts linked to the price of Brent crude. But the fuel was catapulted into the limelight after Russia, the biggest gas supplier to Europe, invaded Ukraine, forcing the continent to turn to it as an alternative.
From an average price of about $9 per million British thermal unit from 2000 to 2020, the cost of LNG surged in 2022 to an all-time high of more than $50 per million Btu. Prices have cooled since then — still, at around $13 per million Btu now, they remain about 40% higher than they were before the war. The buyers’ hope was that next-year prices would fall further. The law of Murphy had other plans, however.
