Gulfstream LNG CEO calls out industry’s “irrational exuberance”

LNG industry insiders are increasingly warning that the market is heading for a calamitous supply glut, and that developers are building too many projects in the face of an uncertain demand outlook.

There was a feeling of “irrational exuberance” at the Gastech conference in Milan in mid-September, according to Vivek Chandra, the CEO of the proposed Gulfstream LNG project in Louisiana.

There were “lots of parties, lots of good food…but I walked away with a sense of unease. Beyond the glitzy façade of Milan and beyond the glitzy façade of so many of the booths, I felt there is an impending crisis coming along,” he said in a video podcast.

At Gastech, industry leaders were tripping over themselves trying to promote their project and advance their plans towards a final investment decision (FID), he said.

“I think we are kind of losing sight of the plot here. The industry is actually growing too fast. There is a huge sense of FOMO, fear of missing out. Everybody is trying to get their projects across to FID,” he said.

“There’s 50, 60, 70 million tonnes of new LNG capacity trying to FID. And that just is way too much. I see this as a recipe for disaster.”

He was not alone. At first glance, the headlines at Gastech were triumphant, with predictions that the demand for LNG would climb inexorably for years to come. During the conference, companies announced a record number of deals between buyers and sellers.

But at the same time, the prevailing view that the market is strong and would remain so for the foreseeable future is now being called into question, including by those within the industry. Despite the euphoria, or perhaps because of it, the warnings are growing louder.

Wood Mackenzie published an analysis and recap of the conference, entitled “Gastech 2025: when will the music stop for US LNG?” The energy consulting firm, which counts numerous oil and gas companies as clients, warned that “cracks may be starting to show” in the industry narrative.

To be sure, many market analysts have been warning for a few years that the global LNG market was setting itself up for a glut in the late 2020s. However, recent data showing very weak demand in Asia, including declines in major Asian markets in 2025, has darkened some analysts’ outlooks.

China’s LNG demand is down a whopping 18 percent so far this year, compared to the same period in 2024. The country widely cited by LNG developers as a seemingly bottomless source of demand has suddenly seen import growth come screeching to a halt, at least for now.

There are multiple factors at play, including China’s rising domestic production, pipeline imports, the history-making rollout of renewable energy, a slowing economy, and trade conflict with the United States. More recently, China has imported LNG cargoes from Russia’s sanctioned Arctic LNG 2. On top of that, the announced deal with Russia to pursue the Power of Siberia 2 pipeline would, if it moves forward, destroy Chinese LNG demand in the medium-term.

Flush with supply and ample storage, China is even planning on sitting out the spot market this winter. While that pause in purchasing may be temporary, for now there’s no sign of a rebound in China’s LNG demand, which should send a shiver down the spine of LNG project developers looking to push their terminals forward.

“Looking further forward, China’s plan to construct the huge 60-GW Medog hydro project, progress towards additional Russian pipeline gas imports and its ongoing massive rollout of wind and solar capacity all pose structural risks to longer-term LNG demand growth,” Wood Mackenzie analysts wrote.

Other key markets are also showing signs of demand weakness. India’s LNG demand was down 10 percent in the first eight months of the year. Thailand’s LNG imports have contracted 15 percent this year, although analysts expect demand to rise in 2026. Pakistan’s solar boom has displaced gas consumption to such a degree that the Pakistani government is negotiating with Qatar to defer contracted volumes that it no longer needs.

Investors to get “squeezed” by shrinking margins

Nevertheless, the rush to green light new LNG continues. Sempra announced a final investment decision on Port Arthur Phase 2 on September 24th. In early September, NextDecade announced FID on the fourth train at Rio Grande LNG in south Texas. Other projects on the Gulf Coast, as well as on the Pacific Coast of Canada and Mexico, are hoping to move forward.

Global LNG capacity could expand by as much as 60 percent by 2030, with the U.S. accounting for half of the growth, according to Reuters. The market is expected to be badly oversupplied by then, likely causing prices to crater.

There could be “winners and losers” as the supply glut takes hold, WoodMac said. Investors are starting to wake up to the financial risks to LNG projects.

“What surprised us at Gastech, however, were the first hints of scrutiny around financing new supply – debt finance looks relatively secure, but equity investors are increasingly attuned to the potential for margins to be squeezed by higher US gas prices and lower international spot prices,” Wood Mac said.

Chandra pointed to the case of NextDecade, which announced an FID on September 9th, and immediately saw its stock price collapse by more than 30 percent.

“The smart money knows the equity investors are going to get squeezed” Chandra said.

WoodMac insists that the industry needs a “reality check.”

“This isn’t about bursting the LNG bubble – far from it. Rather, it’s aimed at keeping the industry match-fit to deliver the next phase of growth in an increasingly interconnected world,” the firm said.

But the financial returns for U.S. LNG have another problem. Costs of construction for new LNG projects are rising.

“We are seeing costs that are 30 to 40 percent more than they were a few years ago,” Chandra said. He said rising capex is “the dirty little secret that I think people are not talking enough about.”

A heavy concentration of LNG terminals under construction along the Texas-Louisiana border (Port Arthur, Golden Pass, Calcasieu Pass, Commonwealth and Louisiana LNG, to name a few) is driving up the cost of materials and labour. U.S. tariffs on steel are also inflating project costs. 

“EPC contractors are overstretching their capabilities, especially in the US, and manning these construction sites is becoming a headache since everyone is competing for the same pool of resources,” Mehdy Touil, lead LNG specialist at Calypso Commodities, a tech company servicing the LNG industry, told Gas Outlook.

“We are not going to see low capex anytime soon,” Chandra said. “My concern is there’s a lot of hype, there’s a lot of excitement…It’s a bit like the dotcom boom.”

“So, I have a sinking feeling right now that this could end quite badly,” he said. “I think there is going to be some blood in the water.” 

(Writing by Nick Cunningham; editing by Sophie Davies)