Where will all the new LNG go?

A wave of new LNG projects received a final investment decision in 2025, but “questions still linger about where all the new LNG will go,” the International Energy Agency said in its latest World Energy Outlook.

A staggering 300 billion cubic metres of new LNG supply will hit the market between 2025 and 2030, expanding global capacity by 50 percent. More than half will come from the United States, and another 25 percent from Qatar.

While Europe and China could buy more cargoes in the years ahead, “the upside potential is limited” because of the “deployment of renewables, nuclear energy in some countries, and efficiency policies,” the Paris-based IEA wrote.

Other parts of South and Southeast Asia, including India, Thailand, and the Philippines could also purchase more LNG cargoes, but those countries are much more price-sensitive, requiring prices well below $8 per MMBtu before they buy in earnest. However, prices that low would badly squeeze margins for American exporters.

“The response in these price-sensitive markets is significant but not enough to use all of the available LNG supply” the IEA said, according to its main scenario. As a result, by 2030, there is a supply overhang of around 65 billion cubic metres.

“The key questions, therefore, are in which markets, at what price and under what conditions this rising tide of LNG supply can be absorbed,” the IEA said.

Those questions remain unanswered.

“The period of LNG surplus in the STEPS makes it difficult for some exporters to fully recover their long-run marginal cost of supply, creating risks that project sponsors write off the value of the assets,” the agency said, referring to its central “STEPS” scenario that sees a 65 bcm surplus in 2030.

The financial risk from a soft LNG market would hit a particular class of energy companies. About three-quarters of the new supply that will come online in the next five years is “flexible,” the IEA said, meaning it is either not linked to an end user or it has a flexible destination clause in its contract.

Historically, LNG export terminals would ink long-term contracts with overseas buyers, which project developers would take to lenders as proof that demand existed. That allowed them to obtain financing. But in recent years a growing trend has been for middlemen — called portfolio players or, simply, traders — to sign contracts with LNG developers. They are then on the hook to take the LNG and flip it to a buyer in another part of the world.

The hunger for traders to sign up for long-term contracts is not evidence that actual demand exists. Rather, it is a bet that demand will materialise. Traders still need to find actual consumers.

Because such a large portion of new LNG capacity has been taken up by traders, it is not clear where all the volumes will go.

The U.S. holds the largest exposure to this supply glut, but the traders hold more of the risk since they have committed to taking the LNG.

Still, the IEA cautioned that “exporters around the world” face risks from oversupply and under-utilisation of less competitive terminals.

Limits of LNG leverage

In a separate report, the Oxford Institute for Energy Studies explored the geopolitical limits of the Trump administration using LNG as leverage in negotiations with other countries. The limits are even more pronounced in a scenario in which the LNG market takes a turn for the worse, which would hit the U.S. LNG industry particularly hard due to higher construction costs and flexible contracting terms. 

“In a cyclical downturn for global gas, falling prices will amplify specific risks to the US LNG sector. In previous periods of gas price weakness, relatively high-cost US LNG projects have been some of the first to slow development or even shut-in supply,” the OIES said.

The Trump administration has pressured other countries to buy U.S. LNG as part of a heavy-handed trade negotiating process. The European Union, for instance, has committed to buying $750 billion worth of U.S. energy products, a wildly unrealistic figure. South Korea and Japan have also pledged to buy enormous volumes of American gas.

But the use of LNG as a trade weapon could “backfire,” OIES said, “diminishing the long-term potential growth in traded gas just as cyclical factors put greater pressure on project developers and traders, risking delays to planned LNG projects.”

China, for instance, completely stopped importing U.S. LNG in early 2025 in response to American tariffs on Chinese goods. Beijing has followed an energy strategy that focuses on coal, the rapid deployment of renewables, and the increase of domestic gas production and pipeline imports. LNG imports have declined in China throughout 2025.

Meanwhile, a few months ago, Russia and China announced progress on the Power of Siberia 2 pipeline. It’s unclear if the project will be built, but if it is, it would take a huge chunk of Chinese gas demand out of the LNG market. It could result in the U.S. LNG industry missing out on $90 billion in lost revenue.

By pressuring potential buyers into exploring alternative sources of gas, as well as a faster shift to renewables, the U.S. may be curtailing the future market for LNG.

“The Trump administration’s politicization of energy may limit market growth, as major buyers seek to diminish energy import reliance while developing homegrown, decarbonized alternatives instead,” OIES concluded.

(Writing by Nick Cunningham; editing by Sophie Davies)