Europe regasification overcapacity concerns “misplaced”: summit

(London, United Kingdom) — Concerns about Europe over-investing in regasification capacity in recent years, exposing itself to stranded asset risks are “misplaced,” and the value of regasification capacity is expected to rise over the coming years, an LNG conference heard on Tuesday.

Players that have secured access to long-term regasification capacity will be at a competitive advantage in the future, as the discount of LNG cargoes delivered into North West Europe against TTF hub prices is set to widen, Massimo Di Odoardo, vice president and head of gas analysis at Wood Mackenzie, told the Gas, LNG and Future of Energy Conference in London.

There is “increased commercial value of regasification capacity in Europe” which will “increase in time” along with utilisation rates, he said.

While spot LNG is still at a premium to long-term oil-indexed gas, the consultancy is expecting the trend to reverse from 2027, amid new capacity coming on stream globally.

There are currently some 175 mmtpa of LNG capacity under construction, including in North America, Qatar and Australia.

At the same time, price volatility is going to persist in the global LNG market as Europe’s dependence on the fuel increases and amid the loss of Russian gas and coal power generation, he said.

Meanwhile, U.S. LNG will continue to be an attractive investment option, with national oil companies (NOCs) and energy majors investments, as well as private capital, being directed to a number of projects.

There is a “theme of private capital supporting new investment in LNG, with companies such as KKR, Adia and MidOcean continuing to “pour substantial money to buy equity” in supply projects, driving investment decisions, along with Middle Eastern NOCs.

He noted that only a small part of the new U.S. LNG capacity being eyed by investors is directly linked to demand by utilities or end-users in Europe and Asia.

In parallel to that, diversification away from U.S. Gulf Coast LNG remains a key strategy for major energy companies, although attractive opportunities are limited, he noted.

Projects that might reach final investment decisions between 2025-2026 include Alaska LNG (20 mmtpa) LNG Canada phase 2 (14 mmtpa) and Rovuma LNG (18 mtpa).

U.S. prospects

The political turn in the U.S. under the Trump administration remains another central theme for the LNG industry, however political risks are overstated, and the outlook for investments remains positive, according to Eric Cantor, vice chairman and managing director at investment bank Moelis & Company, and former Conservative congressman for Virginia.

He said that while Trump was taking a “maximalist” approach in its social media communications, these were primarily aimed at domestic voters, while legislative powers remain firmly in the hands of Congress and executive orders can be reversed by court decisions, he said.

Trump was taking a “sword and shield approach” to energy based on the narrative that gas can contribute to lower energy prices domestically, while LNG exports are a lever for the U.S. to strengthen its influence internationally, he said.

Buying more LNG from the U.S. is a “natural reaction” to Trump’s tariffs and related push to reduce trade imbalances, however “most of (the LNG) has already been contracted, therefore it’s about buying existing LNG from the market” Steve Hill, EVP of LNG and Gas at Mercuria, said.

“We don’t see much turmoil.”

“Trump clearly has an agenda with lots of plus and minuses from LNG,” he continued, stressing that the sector could benefit from faster approval of new projects under the Trump administration, while at the same time it was being hampered by higher gas prices. The renewed commitment to solving the Ukraine-Russia crisis, and talks of restoring Russian supplies to Europe, are to be seen as one way to address high gas prices in the near-term, he said.

“Another thing in the (Trump) agenda is to lower oil prices” which could lead to “less (associated) gas production in the Permian” basin, he warned.

Meanwhile, Germany’s state-owned SEFE is pursuing a strategy of diversification of supply sources, and has just finalised a deal with Azerbaijan’s Socar, the company’s CCO Frédéric Barnaud said.

The company signed a 10-year gas purchase contract with Socar for up to 15 TWh/year, with supplies commencing in 2025, the company said on June 9th.

Replacing Russian gas remains a key commitment in Europe, he said.

“We need to make sure that we have the ability to replace that at a reasonable price.”

Gas storage and CCGT power plants will continue to play a central role in the energy mix in the coming years, he added.

Globally, LNG demand is expected to rise by 56% (equivalent to 230 mmtpa) in the next decade, driven by Asian demand and data centre demand in key geographies including Asia and the U.S.

Wood Mackenzie is forecasting 175 mmtpa of additional LNG demand to emerge in Asia by 2040, amid a decline in domestic gas production.

In China, the industrial and transport sectors will be key drivers, although the key challenge is affordability, with levels of $7-9/ mmbtu considered attractive to buyers, Raghav Mathur, principal analyst at Wood Mackenzie said.

(Writing by Beatrice Bedeschi; editing by Sophie Davies)