Gastech closes in Milan with record LNG deals; risk of oversupply

(Milan, Italy) — The Gastech conference ended last Friday in Milan with a record number of LNG deals being signed by companies, amid the overarching theme of the U.S. push to export more gas to allied countries and expectations that natural gas will remain central in the energy mix in the coming years, supported by data centres’ growth and the rising energy needs of developing countries.

Turkey’s BOTAS signed LNG deals with a number of companies, including BP, Eni, Shell, Cheniere and Jera to import 15 billion cubic metres (bcm) of gas for the 2026–2028 period.

Italy’s Edison signed a 15-year agreement with Shell to purchase about 0.7 million metric tons per year of U.S. LNG starting in 2028, amid the expiration of pipeline gas contracts with Libya and Algeria, which it plans to partly replace with flexible U.S. LNG to be redirected to other markets at times of low demand.

Hungary also announced a 10-year import deal with Shell for 200 million cubic meters per year of LNG.

Meanwhile, the CEO of Argentina’s YPF, Horacio Marin, announced a plan to develop LNG projects with energy giants Shell and Eni, targeting 24-30 million tonnes of exports annually from 2029.

Despite the bullish sentiment in the industry, concerns over the impact of future gas oversupply remain.

“Doubling down on the glut will keep natural gas prices lower for longer,” Seb Kennedy, an energy expert at Energy Flux, told Gas Outlook.

This will end up “hooking consumers on cheap energy and giving gas an economic foothold in end-use applications where it cannot compete at today’s high prices,” as well as creating distressed LNG cargoes and assets, which might open up “opportunities for bargain-hunting” for large players, like the IOCs “who can weather the downturn while carrying loss-making or marginal assets,” he added.

“When you look at project economics, greenfield U.S. LNG projects tend to have a much higher cost base than (for example) Qatari LNG expansions,” he said.

“This makes me question whether all the planned new U.S. LNG capacity will be built” as well as “how much of it will be shut in, and for how long, and whether we will see distressed sales of U.S. LNG tolling or off-take capacity in the depths of the glut,” he continued.

“Of course all of this could change if LNG project attrition is high, there are widespread construction delays, or there is some sort of catastrophic geopolitical supply shock that fundamentally reshapes the global balance,” such as Middle East tensions and Strait of Hormuz closures, he said.

Speaking on the sidelines of the event, an executive at a large European company told Gas Outlook that while the gas exports envisaged in the U.S.-EU deal were unlikely to be absorbed by Europe, at the same time there was scope for increasing U.S. imports in the near-term in order to replace residual Russian gas — including gas through the TurkStream pipeline as well as LNG — due to be phased out by 2028.

In addition, “Europe’s production is declining — assuming a stable demand, this will need to be replaced.”

“U.S. LNG has the advantage of being logistically close” to Europe, although there will be competition with other sources of gas including Africa. “The market will self-stabilise” he argued, amid portfolio players being able to redirect cargoes based on demand and pricing.

Asian demand is set to remain a key driver, with expectations of growth based both on replacement of other fuels and also on new markets opening up for gas, he added.

The theme of the growing energy demand of developing countries was also debated at Gastech.

At a panel on fuelling a just transition, speakers noted that large parts of the African population still have no access to electricity or clean cooking.

Against that backdrop, natural gas plays a key role for Africa’s energy needs, Ainojie ‘Alex’ Irune, managing director at African oil and gas upstream company Oando Energy Resources, said.

He argued that the Russia-Ukraine war had led to a “prioritisation of lives in the global North” as countries competed to secure supplies, adding Africa should be seen through a “different lens” when it comes to the energy transition and the funding of fossil fuel projects.

(Writing by Beatrice Bedeschi; editing by Sophie Davies)