Key takeaways
- Liquefied natural gas (LNG) is natural gas that has been cooled to a liquid state, which reduces its volume by about 600 times but keeps its energy content, making it easier to transport and store.
- By displacing other more pollutive fossil fuels, LNG could help meet global energy demand in the journey to net zero while renewables are being scaled up.
- J.P. Morgan Research estimates global LNG supply capacity to increase by ~350 Bcm by 2030, up ~54% from 2024 levels, driven primarily by an increase in liquefaction capacity from North America and Qatar.
Liquefied natural gas, or LNG, has become a key theme in the energy transition, yet it remains a complex and misunderstood commodity. What does the global LNG landscape look like, and what role could LNG play in the move to net zero?
What is liquefied natural gas?
Liquefied natural gas is essentially natural gas that has been cooled to a liquid state. This process reduces the volume of the gas by about 600 times, but keeps its energy content unchanged, making it easier to transport and store.
Upon reaching its end destination, LNG is returned to gaseous form at import and regasification terminals, and then distributed by pipeline to homes and businesses.
Liquefied natural gas a transition fuel
While natural gas is a fossil fuel, it is relatively clean-burning, meaning it produces fewer emissions than coal or petroleum products. By displacing other more pollutive fossil fuels, it could help meet global energy demand in the journey to net zero while renewables are being scaled up. Plus, due to its portability, LNG can be easily shipped to regions without their own natural gas resources.
“The energy transition is a decades-long, if not generations-long, process. Thinking about the transition journey, coal-to-gas switching is the most realistic solution to address climate change in the near term, while still honoring the developmental rights of energy-hungry nations,” said Shikha Chaturvedi, head of Global Natural Gas and Natural Gas Liquids Strategy at J.P. Morgan.
The outlook for the global LNG industry
Overall, J.P. Morgan Research forecasts global LNG supply capacity to increase by ~350 Bcm by 2030, driven primarily by an increase in liquefaction capacity from North America and Qatar. That supply growth will be met with a substantial increase in regassification capacity globally, which is anticipated to grow by ~300 Bcm by 2030 and is a key signal that natural gas will remain an important part of the energy transition.
“In order to reach consumers globally, the buildout of LNG supply capacity is necessary. While capacity is growing in the U.S., the Russian supply remains uncertain, and we still need to see a matching increase in LNG import and shipping infrastructure as well as in long-term contracts,” Chaturvedi said. “Additionally, we expect that new trade routes established after the start of the Russia–Ukraine conflict will remain in place, with Russian gas continuing to redirect toward the east, and Europe having to rely more heavily on LNG imports from the U.S. and Canada.”
With this increase in capacity, LNG prices are expected to fall in the longer term. “We see a downward global LNG price trajectory with increased volatility, driven by a structurally oversupplied market,” Chaturvedi said.
“We see a downward global LNG price trajectory with increased volatility, driven by a structurally oversupplied market.”
Shikha Chaturvedi
Head of Global Natural Gas and Natural Gas Liquids Strategy, J.P. Morgan
Regional LNG outlooks
U.S.
The U.S. is set to become the largest LNG exporter in the world, producing more than a third of global LNG supply by 2030, according to J.P. Morgan Research estimates. “The country has gone from effectively producing zero LNG in 2015 to 86 million tons in 2023, with more projects in various stages of construction underway,” said Tarek Hamid, head of North American Corporate Credit Research at J.P. Morgan.
The natural gas boom in the U.S. is in part due to low construction costs and a skilled labor pool — factors conducive to the buildout of new LNG facilities. “Another benefit is the safety, surety and security of U.S. LNG molecules versus other molecules that are located in or forced to traverse transportation bottlenecks in the Middle East,” Hamid said.
In addition, natural gas prices in the U.S. are pegged to Henry Hub, a distribution point in Louisiana that functions as the physical settlement location for futures contracts on the New York Mercantile Exchange. “This provides diversification benefits in global LNG portfolios relative to Brent-based pricing,” Hamid noted.
Australia
While Australia has grown to become the second largest LNG-producing nation in the world over the last decade, the outlook for the industry is challenging. Historically, the domestic market has been supplied by offshore gas reserves in Victoria. However, these fields are now mature, and production is expected to decrease.
Over on the west coast, the country’s largest LNG plant is also in decline, exacerbating supply-side issues. This has led to the government growing concerned about meeting domestic demand and imposing regulations on LNG exporters in order to protect domestic consumers.
In addition, the government reformed its Safeguard Mechanism in 2023 — legislation aimed at reducing emissions at Australia’s largest industrial facilities. Under this policy, existing oil and gas projects are obligated to reduce emissions from a baseline, while new projects will be benchmarked against industry best practices, which will likely limit any LNG capacity growth in Australia.
Middle East
Despite the region’s vast hydrocarbon sources, there are only three LNG exporting countries in the Middle East — Qatar, the United Arab Emirates and Oman.
“Currently, Qatar accounts for ~82% of the region’s liquefaction capacity, and is among the top three players in the global LNG market,” said Otar Dgebuadze, part of the Global Commodities Research team at J.P. Morgan. The country exported ~105 Bcm of LNG in 2024, making it the third biggest supplier globally after the U.S. and Australia.
Plans for additional LNG facilities are underway, with two projects scheduled to come online before 2030, and a potential third facility in consideration. These three projects will increase Qatar’s LNG capacity by ~85%, resulting in the production capacity of ~195 Bcm/year by the end of the decade.
Qatar’s new LNG projects are expected to increase its total LNG capacity by 85%.
Europe
Russia holds the world’s largest natural gas reserves, accounting for ~20%. Historically, its gas monetization strategy was centered on selling pipeline gas to Europe. As a result of the Russia–Ukraine conflict however, share of Russian pipeline gas in Europe’s gas supply dropped from ~30% in 2021 to ~7% in 2023.
“The European natural gas industry has seen a massive regime change in the aftermath of the Russia–Ukraine conflict. The reduction of Russia’s flows to Europe was not only a clear game changer for the region’s supply dynamics, but also its approach to natural gas demand,” Dgebuadze said. “We now see more efficient energy and gas use by the residential sector, more robust cost and risk management by the industrial sector and an increased push for renewables in the power sector.”
Overall, the decrease in Russian pipeline gas supply has made Europe more reliant on global LNG imports — the share of the latter in the continent’s supply mix has doubled from 19% in 2021 to 38% in 2023. “However, substituting cheaper and more reliable Russian pipeline gas with more volatile and costly LNG inputs arguably challenges the medium- to long-term competitiveness of Europe’s energy-intensive industries, compared with regions with more readily accessible and affordable gas supply, such as the Middle East and the U.S.,” Dgebuadze noted.
“The reduction of Russia’s flows to Europe was not only a clear game changer for the region’s supply dynamics, but also its approach to natural gas demand.”
Otar Dgebuadze
Global Commodities Research, J.P. Morgan
China
China is the world’s largest LNG importer, representing around 10% of global natural gas demand. “Over the past decade, China has been a large driver of global LNG demand growth as domestic gas demand was growing by ~9% CAGR, but domestic gas production was lagging at only 6–7% CAGR. LNG was what filled the gap,” said Parsley Ong, head of Asia Energy and Chemicals at J.P. Morgan.
This strong demand stems from the role of natural gas as a key transition fuel in China’s path to carbon neutrality. The natural gas penetration grew from 25% in 2010 to 45% in 2020, in large part driven by the switch from coal to gas among rural residential households. In addition, gas-fueled trucks are growing in popularity. “We estimate that in 2024, sales of LNG trucks were up by more than 20% year on year. We are therefore seeing potential for gas-fired trucks to displace diesel demand in the years to come,” Ong said.
However, China’s reliance on LNG comes with challenges, as Ong noted. “The first is cost. If we look at China’s various sources of gas molecules, LNG is the most expensive with an average cost of 2.5 RMB/m3 over the past decade, versus 1.3 RMB/m3 for piped gas imports and less than 1 RMB/m3 for domestic gas,” Ong said. “The second is energy security. No single nation represents over 20% of China’s crude oil imports, whereas Australia accounts for a relatively high proportion of around 34% of its LNG imports.”
Going forward, China’s gas demand growth rate is projected to slow to 5–7% CAGR between 2025 and 2030, roughly in line with its domestic production growth and piped gas imports growth. “As such, China’s reliance on LNG to fill the gap will be lower versus the previous decade,” Ong said. “Rather, spot LNG might serve as a peak-shaving mechanism, where low-cost spot LNG molecules are purchased and stored during the off-peak summer months for use during winter.”
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