U.S. Lake Charles LNG project suspended amid global supply glut

Energy Transfer has suspended development of its Lake Charles LNG project in southwest Louisiana, becoming the first major U.S. LNG project to slam the brakes on development because of questionable returns in the face of a global supply glut.

Energy Transfer, which is predominantly a pipeline company in the midstream sector, had struggled to make progress on Lake Charles LNG for the past decade. The company said that it was suspending the 16.5-million-tonne-per-year proposed LNG project “in order to focus on allocating capital” on gas pipeline projects that offer “superior risk/return profiles.”

“Energy Transfer management has determined that its continued development of the project is not warranted by Energy Transfer but remains open to discussions with third parties who may have an interest in developing the project,” the company said in a press release.

The U.S. saw a record number of final investment decisions in new U.S. LNG capacity in 2025, but market sentiment has also suddenly swung in a bearish direction. Henry Hub prices have shot up in the last three months, in part because of a growing portion of gas supply is exported in the form of LNG. At the same time, prices in Europe (TTF) and Asia (JKM) have recently fallen to some of the lowest levels seen since the onset of the war in Ukraine. The price convergence has squeezed margins for exporters, and may have even temporarily shut the profit window for spot U.S. LNG shipments.

The wave of supply expected to come online in the next few years will exacerbate the glut. Proposed LNG projects that are not far along face daunting odds of moving forward.

“When you’re chasing billions of dollars in projects, several of which we’ve already announced, we’ve got to be careful stepping out on something like this,” Energy Transfer co-chief executive Mackie McCrea told investors in early November, according to Argus.

On the same day as it suspended the Lake Charles LNG project, Energy Transfer announced the expansion of Transwestern Pipeline’s planned Desert Southwest expansion project, which would carry Permian gas from the Waha gas hub in West Texas to customers in Arizona.

Lake Charles LNG had recently been trying to renegotiate liquefaction fees with buyers due to ballooning construction and labour costs, according to Natural Gas Intelligence.

The decision could have knock-on effects. According to Argus, the suspension of Lake Charles LNG may undercut the ability of Saudi Aramco to build up an LNG portfolio. Aramco holds a 49 percent stake in MidOcean Energy, and MidOcean had signed a preliminary agreement to fund 30 percent of Lake Charles LNG’s construction costs in exchange for 30 percent off-take of the plant’s supply. That agreement is now dead.

Meanwhile, BP announced that it has appointed Meg O’Neill as its new CEO. O’Neill is the chief executive at Woodside Energy Group, which is building the Louisiana LNG project just south of Lake Charles. Her exit from Woodside could result in a strategy shift at the company, with potential investor pressure applied to the company to pivot away from challenging LNG projects, according to analysts.

“O’Neill’s successor might rewrite Woodside’s gas playbook — a probability that could weigh on sentiment until the future path is clear,” Bloomberg Intelligence said in a note.

“Investors will be hoping that O’Neill’s departure is a circuit breaker on Woodside’s habit of pursuing high-capex, marginal fossil fuel projects, and is an opportunity to instead start focusing on better capital returns,” the Australasian Centre for Corporate Responsibility said in a statement.

ACCR pointed to Woodside’s decision to purchase a “high-cost, near-bankrupt LNG facility in Louisiana for over $1 billion,” referring to Louisiana LNG, previously known as Driftwood LNG, which Woodside purchased from Tellurian.

“At Woodside, O’Neill’s departure is an opportunity for a much-needed strategy refresh.”

(Writing by Nick Cunningham; editing by Sophie Davies)