Renewables threaten to deepen global LNG glut

Rapid advances in renewable energy and battery storage are poised to intensify pressures on the global liquefied natural gas (LNG) market, raising the risk that a looming supply glut could turn into a prolonged downturn, according to Reuters Breakingviews columnist Antony Currie.

Several fossil fuel industry executives have already warned that aggressive expansion plans by major producers such as Exxon Mobil, Shell, and Woodside Energy may be creating a supply bubble. The International Energy Agency estimates global LNG production capacity could rise by around 50% by 2030. The growing cost competitiveness of renewables, however, suggests the impact of any oversupply could be more severe than previously anticipated.

At first glance, the expansion of LNG capacity appears justified. Europe’s share of global LNG imports has doubled to around 30% since Russia’s invasion of Ukraine in 2022, according to Capital Economics. Rising electricity demand from artificial intelligence-driven data centres has also bolstered gas demand. In addition, U.S. President Donald Trump has sought to promote greater purchases of American LNG through trade negotiations with the European Union, Vietnam and other countries.

The industry also continues to position LNG as a “transition fuel” to replace coal, particularly in Asia, which accounts for about 65% of global LNG imports.

However, doubts are emerging even within the sector. TotalEnergies CEO Patrick Pouyanné warned at the Gastech conference in Milan in September that the industry may be “building too much.” Vivek Chandra, chief executive of Gulfstream LNG in Louisiana, described prevailing sentiment at the event as “irrational exuberance.”

Read also: Global LNG bunkering infrastructure to expand with 57 more ports by 2026

The economics of gas-fired power generation are also becoming less attractive. According to U.S. utility NextEra Energy, the cost of gas turbines has nearly tripled since 2021 to around US$2,400 per megawatt-hour. At the same time, battery costs fell by about 40% in 2024 alone. Wood Mackenzie estimates that by 2030, renewable power combined with battery storage could be up to 56% cheaper than gas-fired generation on an all-in cost basis.

China, the world’s largest LNG importer, is already showing signs of reduced dependence on imported gas. The country continues to expand wind, solar and hydropower capacity, while LNG imports fell year-on-year for 11 consecutive months through October, according to data provider Kpler. China is also expected to increase gas purchases from Russia, potentially at the expense of U.S. and Qatari supply, which account for a large share of planned global LNG capacity additions.

Renewable energy also holds an advantage in deployment speed. Major renewable projects typically take around one year to install, compared with roughly five years for a gas-fired power plant, assuming equipment is readily available. In practice, supply chain constraints remain a major hurdle for gas generation. Turbine manufacturers GE Vernova, Siemens Energy, and Mitsubishi Heavy Industries—together accounting for about 90% of the global market—have warned that delivery times could stretch to as long as eight years, according to the Institute for Energy Economics and Financial Analysis.

These delays significantly reduce the feasibility of gas-fired power plants replacing coal capacity in several Asian markets, including Vietnam and the Philippines.

Taken together, excess fuel supplies, equipment bottlenecks, and increasingly competitive renewable alternatives point to mounting challenges for LNG market incumbents, with the risk of a sharp market correction ahead, Currie concluded.

Editing by Reiner Simanjuntak