The Dream of Diversifying and Sourcing New LNG Supplies and the Reality on the Ground.

Diversifying and Sourcing New LNG Supply

As the world undergoes an energy transition, it requires something to transition to, otherwise we must secure reliable LNG supply which is critical for both buyers and producers. The global LNG market is poised for significant shifts, especially following recent policy decisions and geopolitical events. For buyers, securing a diverse and resilient LNG supply is essential to ensuring energy security, affordability, and sustainability.

For existing projects, the immediate impact of the pause has been limited, but new projects face delays. Despite this, upcoming U.S. LNG projects, such as Argent LNG and other projects like Woodside Louisiana LNG and Plaquemines LNG, are still expected to come online, bolstering the country’s LNG export capacity. These projects remain attractive due to the U.S.’s abundant natural gas resources and relatively low production costs. U.S. LNG will continue to play a pivotal role in supplying Europe and Asia, which are seeking diversified, reliable sources.

What Are LNG Supply Options Beyond the U.S. and Qatar, and What Are the Risks?

Beyond the U.S. and Qatar, several countries are emerging as LNG suppliers. However, each faces unique risks that could delay or prevent them from coming online as planned.

Australia: Australia is the second-largest LNG exporter and continues to have strong potential. However, domestic energy policies focused on emissions reduction and increasing local gas supply could limit the growth of new export projects. Risk: The government’s focus on domestic energy security, environmental regulations, and opposition from local communities may constrain future LNG expansion, potentially delaying new capacity from coming online.

Mozambique: Mozambique has the potential to be a significant LNG exporter, with substantial reserves in the Rovuma Basin. However, political instability and security issues, including insurgent violence near key LNG project sites, have delayed development. TotalEnergies and ExxonMobil have both faced challenges in advancing their projects. Risk: Continued security threats, combined with potential regulatory and financial hurdles, could cause prolonged delays, keeping Mozambique from fulfilling its LNG potential in the short to medium term.

East Africa (Tanzania): Tanzania’s LNG potential is notable but remains underdeveloped. Political instability, as well as infrastructure and regulatory challenges, have delayed the development of LNG projects. Risk: Without significant investment in infrastructure and stable governance, Tanzania’s LNG projects could struggle to attract the necessary financing and partnerships to come online.

Canada: Canada, particularly on its west coast, has significant LNG export potential. The LNG Canada project, led by Shell, is expected to start operations soon, with a focus on serving Asian markets. Risk: Environmental concerns, particularly regarding Indigenous rights, may slow down the development of additional projects. There is also uncertainty around the completion of necessary pipeline infrastructure to support LNG exports from Canada.

Russia: Russia’s LNG exports have been severely impacted by geopolitical fallout from its invasion of Ukraine. Sanctions have isolated Russia from Western markets, but it remains a supplier to China and some Asian countries. Risk: Continued sanctions, coupled with reduced investment from Western companies, limit Russia’s ability to expand its LNG exports. Moreover, geopolitical instability could further disrupt its capacity to serve global markets.

Nigeria and Angola: Nigeria and Angola have long been significant LNG exporters, but infrastructure challenges and regulatory hurdles persist. Nigeria is attempting to expand its LNG capacity with new projects, while Angola is working to optimize its existing LNG plants. Risk: Political instability, regulatory inefficiencies, and corruption could hamper both countries’ ability to fully tap their LNG potential. Delays in project financing and execution could also prevent them from coming online as planned.

Eastern Mediterranean (Cyprus, Israel, Egypt): Recent gas discoveries in the Eastern Mediterranean have positioned Cyprus, Israel, and Egypt as new LNG suppliers. Their proximity to Europe makes them attractive suppliers for the continent. Risk: Geopolitical tensions in the region, particularly involving maritime disputes and diplomatic challenges, could delay the development of LNG projects. Additionally, regulatory hurdles and infrastructure development timelines remain uncertain.

How Important Is LNG Supply Diversification for Buyers and the LNG Industry?

Diversifying LNG supply is critical for energy security, especially for major importers in Europe and Asia. The global LNG market has grown increasingly interconnected, and supply diversification helps mitigate risks associated with geopolitical tensions, price volatility, and supply disruptions.

Energy Security: The Russia-Ukraine conflict highlighted the importance of energy security for Europe. Diversification of LNG sources is critical to reduce dependency on specific regions, especially Russia, which has historically supplied large volumes of pipeline gas to Europe. By diversifying LNG sources to include suppliers from the U.S., Qatar, Africa, and potentially East Africa and the Mediterranean, buyers can mitigate the risks associated with political or operational disruptions in one region.

Affordability and Pricing: Diversification helps manage pricing risks. As more suppliers enter the market, buyers have the ability to negotiate better pricing and mitigate volatility. The broader the supply pool, the more stability can be achieved in the market, preventing the extreme price fluctuations seen during supply shortages.

While the U.S. and Qatar remain dominant players, emerging LNG suppliers like Mozambique, Canada, and countries in the Eastern Mediterranean offer new sources of supply for global markets. However, each of these options carries unique risks that could delay or prevent projects from coming online. Political instability, regulatory hurdles, infrastructure limitations, and environmental concerns all pose challenges to the development of these new LNG sources.

Despite these risks, upcoming U.S. projects like Argent LNG, Driftwood LNG, and Plaquemines LNG are expected to bolster U.S. capacity, helping to meet global demand. For buyers, diversification of supply is critical to ensuring energy security and managing price risks, especially as the world transitions toward more sustainable energy sources. This diversification will be key to navigating the volatility and challenges in the global LNG market as geopolitical and environmental pressures reshape the industry.