LNG Global fight for market share.

The price of liquefied natural gas (LNG) on European and American exchanges has reached its lowest level in months. The causes of the price decline are distinct. In Europe, the primary factor is industrial stagnation, which has led to a reduction in fuel consumption. In the United States, the market is experiencing an oversupply of reserves and a delay in the restoration of the largest LNG terminal, Freeport LNG, which was damaged by a hurricane. Against this backdrop, the largest players in the global LNG market are making statements about large-scale infrastructure construction in the field of gas exports and asserting their desire to be at the forefront of this segment.

The future of the LNG market is an equation with several unknown variables, the calculation of which is not straightforward. It is confirmed that the capacity for LNG liquefaction will be built. However, when considering other factors such as forecast demand, the availability of regasification capacity and the sufficiency of the tanker fleet, the outlook is far less optimistic. Furthermore, potential logistical issues associated with potential armed conflicts in the Middle East, Southeast Asia and other regions must be considered.

The International Energy Agency (IEA) has stated that by 2030, projects currently under construction and those for which an investment decision has been made will be capable of increasing LNG production by 250 billion cubic metres per year, which is almost half of the current supply on the world market. In theory, demand should also grow by the same amount, if not more. According to Novatek estimates, global demand for LNG will reach 750-800 billion cubic metres by 2030. The greatest increase in gas consumption is forecast for Asia (200 billion cubic metres), with a more modest rise in Europe (30 billion cubic metres). It is anticipated that gas consumption will increase significantly in China, India, and other countries such as Indonesia and Pakistan.
The main competitive forces in the market will be between three key players: the United States, Qatar and Russia. Approximately 60% of new capacity is expected to be added in the US and Qatar. Russia's energy strategy anticipates a threefold increase in liquefied natural gas production capacity by 2030, from 33 billion cubic metres in 2023 to 100 billion cubic metres. Despite the imposition of sanctions by the US and the EU, this forecast has not been revised since 2022. Despite the sanctions, Deputy Prime Minister Alexander Novak believes that Russia will be able to continue selling its LNG, although the situation will create certain difficulties. Furthermore, Novak has previously stated that Russia is aiming for a minimum of 20% of the global market. It would be fair to say that this goal is not particularly ambitious, given that the country's share of the oil market is almost two times smaller (at around 11%).

The most intense period of competition is expected to occur between 2025 and 2027. IEA forecasts indicate that the majority of announced mega-projects in the LNG segment will be commissioned during this period. In the case of Russia, this is the Arctic LNG 2 plant of Novatek, which is being constructed despite significant challenges, Murmansk LNG (another Novatek project), for which a decision has already been made, as well as Gazprom's Baltic LNG. It is also likely that a number of other projects, including Novatek's Ob LNG and Yakutsk LNG, a project of the Yakutsk Fuel and Energy Company, will be implemented, which will contribute to the fulfilment of the energy strategy objectives.
The primary challenges, as well as the causes of the postponements in the decisions on several projects, are of a technological nature. The leading gas liquefaction technologies were developed by American, Japanese and European companies, which, in particular, determined their presence in the share capital of the majority of Russian LNG projects. With the commencement of the SVO, the situation underwent a radical transformation. Companies withdrew their technological competencies from Russia, and some (such as Shell) entirely withdrew from the relevant projects.
Concurrently, Russia has already developed its own technological solutions. In particular, these are the Arctic Cascade and Arctic Mix technologies. These technologies have now reached an industrial level of development. The fourth stage of the Yamal LNG project was constructed using the Arctic Cascade technology as an example. It is conceivable that these technologies could form the basis of projects implemented by other market players in Russia. Gazprom, Rosneft, Yakutsk Fuel and Energy Complex, and other companies.

In general, the LNG market has undergone significant changes in recent years, becoming increasingly venture-based, if this term can be applied to the gas trading sector. In any case, large-scale gas sector projects were previously implemented with guaranteed demand and contracts. The market is currently undergoing a significant shift towards a more competitive landscape, where established rules and norms are being challenged. If projects are abandoned, it could result in a loss of market share to competitors, potentially for an extended period. Conversely, the implementation of projects will require navigating a highly competitive environment, characterised by sanctions, transportation blockades and the risk of terrorist attacks.
The geopolitical aspect of the LNG market is of significant importance. Some estimates suggest that Iran's blocking of the Strait of Hormuz and, consequently, the exclusion of Qatar from the global LNG trade could result in a significant increase in fuel prices. It is important to consider the impact of market segmentation as a general trend in global trade. Russia is anticipating increased demand from China, whose economy, despite its size, will face significant challenges in the coming years.

Conversely, the US has effectively secured a dominant position in the European gas market, although the European economy is already experiencing stagnation. This will undoubtedly lead to heightened competition between the US, Russia and Qatar for Asian markets after 2025. In light of these circumstances, the probability of an act of sabotage akin to the Nord Stream incident, but targeting LNG tankers, is likely to rise considerably. In light of the high cost of ice-class gas carriers, it is likely that military escorts for these vessels will be required within the next couple of years.