Q4 2025 Research Theme: Energy Security Concerns Will Drive Long-Term Demand For North American LNG
- Dec 31, 2025
- 12 min read
For this year-end letter, to mark the recent 10-year anniversary of the first commercial LNG cargo from the U.S. Gulf Coast, we had prepared a brief review of the U.S. LNG industry which, even after a decade of extraordinary growth, remains on course to double output by 2031, further extending U.S. dominance of the global LNG market.
“Events, dear boy, events”1: however, at a stroke, the Middle East conflict has cut off 20% of global oil and LNG supply, a swift reminder of the fragility of global energy markets.
The scale of this supply-side shock dwarfs that of the 1973 OPEC oil embargo, which saw oil prices quadruple within three months and led to widespread fuel rationing. Diplomacy saw the OPEC embargo last just five months and, as a political rather than military conflict, no vital upstream or midstream infrastructure sustained damage.
With oil markets facing the ‘largest supply disruption in history’, the IEA has ordered the largest ever release of government oil reserves, 400 mmbbls, to calm nerves and prices.
But global gas markets face a more acute crisis than oil markets. Oil shortages can be eased by the release of strategic reserves or different shipping routes, but few such near-term options exist for LNG. Strategic LNG storage does exist but is limited in scale, and LNG export and import cargoes cannot be readily rerouted via pipelines.
The stark reality of Qatar’s shutdown of its vast and now damaged Ras Laffan LNG export facility highlights the need for supply diversification. LNG buyers worldwide, particularly those Asian nations that rely on Qatari LNG for 20 – 35% of their overall gas needs, are now scrambling to secure prompt non-Middle East LNG cargoes, but will no doubt be reassessing their longer-term portfolio strategies through the lens of energy security rather than just cost.
Our review has therefore expanded to consider the role that U.S. and other LNG players can play in restoring balance and lower risk to the global LNG market.
The sad truth is that U.S. and other LNG exporters can neither swiftly nor fully mitigate ‘lost’ Qatari LNG volumes due to a lack of spare capacity, ramp-up and shipping constraints. Such scarce near-term supply elasticity will inevitably prompt substitution by coal-fired power generation as well as demand destruction.
However, in the medium term, ‘shovel ready’ brownfield LNG projects on the U.S. Gulf Coast, and similar projects on Canada’s west coast, do stand ready to benefit: such projects offer accelerated FID approval, material LNG export capacity and, in Canada’s case, shorter, cheaper transit routes to Asia.
Perhaps, more important than all, North American LNG projects can lay claim to an enduring ‘security premium’ relative to the ‘risk premium’ that will now be attached to Middle East LNG.
With energy security surely now foremost in global LNG buyers’ long-term portfolio strategies, we expect increased demand for North American LNG exports and, in turn, increased demand across the entire U.S. and Canadian LNG supply chain – benefiting downstream, midstream and upstream operators and all related OFS and equipment suppliers.
Note: For those less familiar with the relative scale of global natural gas and LNG markets, key LNG exporters and Qatar LNG’s principal customers, we’ve attached a few charts at the end of the letter that provide further background.
1 A famous quote by U.K. Prime Minister 1957 – 1963, highlighting how unforeseen crises can derail a government
The Global LNG Market – ‘If You Build It, They Shall Come’
Since 2000, global LNG trade volumes have more than quadrupled; over the same period, LNG’s share of global gas demand has tripled from ~5% to ~15%. Such staggering rates of growth were underpinned by three major investment cycles, respectively driven by Qatar, Australia and the U.S., but facilitated by profound changes to market structure, participants and contracts.
U.S. LNG Exports Have Transformed Global Energy Markets
Most people probably missed the recent 10-year anniversary of a landmark event that ushered in a new energy era that continues to reshape and indeed stabilise global energy markets. On February 24th 2016, the first albeit modest commercial LNG cargo was exported from Cheniere Energy’s Sabine Pass terminal on the U.S. Gulf Coast.
It is worth recalling that back then the U.S. was a net importer of natural gas; indeed, Sabine Pass began operations eight years earlier – as an LNG import terminal!
From Zero To World #1 Within A Decade – U.S. LNG Export Growth Is Remarkable
From such modest beginnings a mere decade ago, the U.S. has become - as we are all aware – the world’s largest LNG exporter, surpassing both Qatar and Australia, with annual 2025 LNG export volumes averaging 15 bcf/day, ~26% of global LNG trade volumes, which in turn represent ~ 15% of global gas consumption of ~400 bcf per day.
Annual U.S. LNG Exports, 2015 – 2025
Innovative Contract Structures (& Plenty Of Gas) Drove The U.S. LNG Boom
Aside from an abundance of domestic gas feedstock fuelled by the ‘shale boom’, innovative contract and pricing structures – pioneered by Cheniere Energy – played an instrumental role, swiftly establishing the U.S. as a leader within the global LNG market.
While most LNG cargoes are indexed to crude oil, U.S. LNG is indexed to Henry Hub gas – providing portfolio diversity and a material discount when high oil pricing prevails.
Unlike traditional point-to-point LNG contracts, which mimic the rigidity of pipelines, U.S. LNG is sold on a free-on-board (FOB) basis, reflecting the flexible, seaborne nature of LNG cargoes. With buyers – traders, marketers and end users alike – free to redirect or resell cargoes, FOB contracts provide valuable optionality and improved liquidity to the global LNG market. While most U.S. LNG is contracted on a long-term basis, the innate FOB flexibility of such contracts ensures that such LNG cargoes can be redirected to spot buyers whenever it makes economic sense.
FOB contracts have proved so popular that they now represent almost half of all contracted global LNG volumes, twice that of U.S. LNG exports. Spot trading has likewise continued to gain traction, now representing 35-40% of global LNG trade.
The U.S. Now Leads A New Global LNG Investment Cycle
Global gas markets are on the crest of a fresh wave of LNG supply, driven by a dramatic post-2019 surge of final investment decisions (FIDs) for LNG projects worldwide.
The U.S. leads this new investment cycle: between 2019 and 2025, over 280 mmtpa (37 bcf per day) of aggregate global LNG capacity reached FID, of which U.S. Gulf Coast operators account for over 50%, Qatar less than 20%.
Final Investment Decisions (FIDs) - Global LNG Export Capacity, 2016 - 2025
Post-FID Projects In Construction Could Double US LNG Export Capacity By 2031
Based solely on post-FID projects already in construction, this fresh wave of investment could raise global LNG capacity by 50% to ca. 650 mmtpa (ca. 86 bcf per day) by 2031; LNG’s current ~15% share of global gas demand would increase to an estimated 20% of 2031 global gas demand.
With five operational LNG export terminals, the U.S. Gulf Coast is already the largest LNG export hub within the Atlantic basin. By 2031, U.S. LNG export capacity is set to double to ca. 30 bcf per day – extending its market share from 26% to 35%; Qatar’s market share would remain at ca. 20%. Already the #1 and #2 U.S. LNG exporters by volume, Cheniere Energy and Venture Global will remain the two largest players on the U.S. Gulf Coast, despite new entrants such as Golden Pass (ExxonMobil/Qatar Energy), Rio Grande LNG (NextDecade) and Louisiana LNG (Woodside Energy).
U.S. LNG Export Capacity, 2016 – 2031, Operational & Post-FID Under Construction
Pre-FID Projects Could Add 30% More U.S. LNG Output By 2031
Beyond the post-FID LNG projects already under construction, there are further pre-FID LNG projects on operators’ books. With FEED studies already complete and all relevant approvals secured, such projects – typically additional phases/trains of those already under construction – merely await FID approval.
Were such FID approvals to be accelerated, it is possible that up to 9 bcf per day of incremental U.S. LNG export capacity could be online by 2031, potentially lifting the U.S. share of the global LNG market beyond 40%.
The Outbreak Of War Has Exposed The ‘True’ Fragility of Qatari LNG
QatarEnergy’s declaration of force majeure, mere days after the outbreak of war, transformed – in an instant – theoretical LNG supply chain risk into a material liability.
Déjà vu all over again: the complete shutdown of Qatar LNG – 20% of global LNG supply – provides a stark wake-up call for energy markets and consumers worldwide. Europe got a rude awakening back in 2022 when, post Russia’s invasion of Ukraine, it struggled to wean itself off the cheap Russian gas that previously met 40-45% of its gas needs.
How many more wake-up calls are required to remind stakeholders of the primacy of energy security and portfolio diversification over cost, in this case low-cost Qatari LNG.
For Qatari LNG and thus global gas markets, the long-flagged risk associated with cargoes transiting the Strait of Hormuz ‘chokepoint’ is real but secondary in our view.
It was the two drone attacks on QatarEnergy’s massive 14-train Ras Laffan LNG hub that prompted force majeure and the halting of all production, not the transit risk to cargoes.
In war, Qatar’s LNG output has proved binary: 100% operational or 100% shutdown – an outcome that surely merits a higher geopolitical risk premium for future cargoes.
U.S. LNG Warrants An Enduring ‘Security Premium’ Over Qatar LNG
Qatar enjoys the world’s lowest LNG production costs (ca. US$0.30 per MMbtu), far below that of Henry Hub-linked U.S. LNG – an enduring economic advantage that will no doubt reassert itself once hostilities in the Arabian Gulf cease and exports resume.
However, the volatile postcode and physical vulnerability of Qatar’s massive 14-train LNG complex can no longer be ignored: recent Iranian strikes damaged two of the LNG trains and one of two gas-to-liquids (GTL) facilities, resulting in a 17% loss of export capacity (ca. 1.7 bcf per day) potentially for 3 – 5 years, according to QatarEnergy’s CEO. The attendant risks have become a costly reality that will inevitably pressure LNG buyers to increase their diversity of both supply and transit route over a purely low-cost focus.
LNG buyers across Asia are already scrambling to replace Qatar’s ca. 23% collective share of their overall contracted LNG supply. India, Pakistan, Bangladesh, Taiwan, South Korea and Singapore are particularly vulnerable, relying on Qatari LNG for 20 – 35% of their overall gas needs.
By contrast, although U.S. LNG can never match Qatar’s production costs, all key U.S. LNG export infrastructure is geographically dispersed along the U.S. Gulf and Atlantic coasts, far from any conflict zones, with diverse routes available to multiple markets.
Even if this conflict prove short-lived and the Strait of Hormuz reopens swiftly to energy exports, U.S. LNG exports should warrant an enduring ‘security premium’, particularly amongst Asian buyers looking to reduce heavy portfolio exposure to Qatar LNG. The same ‘security premium’ argument can also be made for other Atlantic and Pacific Basin LNG exporting nations, both incumbent – Canada, Nigeria, Trinidad & Tobago and emerging – Argentina.
Given the scale of Qatar’s supply-side shock, what are the likely near-term and longer-term strategic outcomes for global LNG exporters outside the Middle East?
Near-Term: North American & Other LNG Cannot Fully Offset The Loss of Qatar LNG Cargoes
Four years ago, U.S. LNG exports stabilised European gas markets following Russia’s invasion of Ukraine, mitigating Europe’s prior and unduly heavy reliance on Russian gas.
The outbreak of war in the Middle East has once again exposed the fragility of global energy markets. At a stroke, the shutdown of Qatar’s Ras Laffan complex removed ca. 11 bcf per day from the LNG market – 20% of current global LNG supply, a profound shock that saw European (TTF) and Asian benchmark (JKM) gas prices surge by 70% in the immediate aftermath.
This supply-side shock will reverberate across global markets for many months and years to come. Facility repairs and restoration of full export capacity could take 3 – 5 years according to QatarEnergy. For those LNG trains that survive this conflict undamaged, Qatar Energy also advises that any restart must be gradual, requiring a ramp-up over several weeks to avoid causing damage to the liquefaction trains.
Can U.S. LNG cargoes once more come to the rescue? In the immediate term, no.
Despite being the world’s largest LNG exporter, its freedom to act as the ‘swing’ global supplier and swiftly replace ‘lost’ Qatari cargoes is hindered by near-term infrastructure, contractual and logistics constraints.
U.S. LNG export facilities are effectively maxed out at almost 19 bcf per day. Short-run supply elasticity is limited to ca. 2 bcf per day, a fraction of the ‘lost’ Qatari volumes.
New capacity takes months to ramp-up: although several new U.S. LNG projects are being commissioned, few can contribute fresh, material LNG volumes in the near-term.
Cheniere Energy’s newly commissioned Corpus Christi LNG Train 5 will bring just 0.2 bcf per day of incremental capacity to the market over the next month or so.
Golden Pass’ LNG Train 1 – ironically a Qatar Energy/ExxonMobil JV – is also newly commissioned, but ramp-up to capacity (0.8 bcf per day) will also take months. Trains 2 & 3 are under construction, with no LNG output until late 2026/early 2027.
Venture Global’s Plaquemines plant could, if approved, lift output by 0.8 bcf per day; in fact, the U.S. Secretary of Energy just authorized Venture Global to increase Plaquemines output by 0.45 bcf per day.
By way of context, other global players offer little immediate remedy: Australia, the third-largest LNG exporter, has few spot cargoes available; its LNG plants are operating at or near full capacity with most production locked into long-term contracts. Deferring maintenance for six months could however potentially yield a modest 0.8 bcf per day.
Likewise, other smaller LNG facilities have limited spare capacity: Canada’s LNG Canada – ca. 0.5 bcf per day; Trinidad & Tobago’s Atlantic LNG – ca. 0.2 bcf per day.
In summary, there is virtually no slack in the global LNG supply, certainly not enough to adequately address the immediate shortfall imposed by the shutdown of Qatar LNG. Furthermore, even if additional LNG volumes could be sourced, securing an available LNG tanker is no mean feat. Tanker rates to Europe and Asia have surged six-fold to ca. US$300,000 per day amid the scramble for prompt delivery, as longer transit routes tie up capacity.
Longer-Term: Pre-FID North American LNG Projects Will Be Main Beneficiaries
Even if the Middle East conflict is resolved swiftly, Qatar’s force majeure will surely increase longer-term demand for LNG cargoes in both Atlantic and Pacific basins as global buyers reconsider their long-term portfolio exposure to the strife-torn Middle East. North American LNG projects can rightly lay claim to an enduring ‘security premium’ relative to the demonstrable ‘risk premium’ now attached to Middle East LNG.
Beyond capacity already under construction but not yet fully contracted, the next-best sources of incremental supply are ‘shovel ready’ pre-FID LNG projects that carry little execution risk. The best such candidates for accelerated FID approval would be brownfield extensions i.e. additional trains to existing LNG export facilities or ‘quasi-brownfield’ extensions to those under construction.
‘Shovel‑ready’ brownfield LNG projects on the U.S. Gulf Coast, and similar projects on Canada’s west coast, are well-placed to gain accelerated FID approval as LNG buyers reassess their longer-term portfolio strategies.
U.S. Gulf Coast: Based on the latest EIA data, pre-FID brownfield LNG projects such as Cameron LNG Train 4, Louisiana LNG Phase 2, CP2 Phase 2, Freeport LNG Train 4 and Gulf LNG would add an aggregate 6 bcf per day of LNG export capacity. STOP PRESS: Venture Global’s CP2 Phase 2 just secured FID approval (0.8 bcf per day).
Three further greenfield U.S. LNG projects, once FID-approved, would raise overall incremental U.S. LNG supply by 9 bcf per day, or 30% of 2031 capacity.
Pacific Basin – Canada: With LNG Canada Phase 1 now exporting ca. 1.4 bcf per day, FID approval of LNG Canada Phase 2 is expected this year, prospectively doubling export capacity to 3.7 bcf per day. A second project, Ksi Limins, is being fast-tracked for FID approval this year, adding a further 1.5 bcf per day of prospective export capacity.
LNG shipments from British Colombia offer more than just geographic diversity to Asian buyers. Canada’s west coast is significantly closer to Asian markets than most rival exporters, with no chokepoints such as the Panama Canal, Suez Canal or Strait of Hormuz enroute. LNG carriers require just 10 days to travel from Canada’s west coast to Tokyo or Shanghai, half that required for a shipment from the US Gulf Coast via the Panama Canal – that’s worth ca. US$1.20 – $1.25 per mmbtu on the bottom line.
With energy security surely now foremost in global LNG buyers’ long-term portfolio strategies, we expect increased demand for North American LNG exports and, in turn, increased demand across the entire U.S. and Canadian LNG supply chain – benefiting downstream, midstream and upstream operators and all related OFS and equipment suppliers.
Appendix: Natural Gas & LNG Data
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