Liquefied natural gas (LNG) prices are anticipated to rise significantly heading into 2025 due to an imbalance between supply and demand. Following a period of record-low prices, gas production in the United States saw a decline from 2023 to 2024 as companies scaled back operations to address oversupply. However, production is expected to rebound in 2025, but demand is likely to outpace this increase, leading to a sharp uptick in prices.
Industry experts have highlighted several contributing factors to this projected shift. Thomas Jorden, CEO of Coterra Energy, noted the combined pressures of growing LNG exports, increased electricity generation demand, and the influence of seasonal winter weather. This dynamic is forecasted to tighten supply and drive prices higher in the coming years.
The Energy Information Administration (EIA) has projected a 33% increase in domestic gas prices from 2024 to 2025, attributing the rise primarily to growing export demand. Analysts from Bank of America also emphasised that the expanding LNG market will be a major factor in pushing prices to a three-year high. Louisiana, a key hub for natural gas production and export, is expected to experience the dual impacts of price increases on both consumers and industrial sectors.
In 2023, the United States held its position as the world’s largest LNG exporter, with Louisiana accounting for 61% of U.S. exports. The state also relied heavily on natural gas for electricity generation, with the fuel driving 76% of its net electricity output. Seven of the state’s top ten power plants depended on natural gas, reflecting its critical role in energy production.
Efforts to balance the market are underway. New operations, such as the expansion of Venture Global’s Plaquemines facility, are expected to boost supply. However, these effects will not be immediate, as the facility must first complete its testing phase and begin full production.
The rapid growth of LNG export facilities along Louisiana’s coast has not been without controversy. Concerns about safety for nearby residents and environmental impacts have prompted debate. Earlier this year, the Biden administration paused the approval of new LNG terminals due to climate change risks and potential domestic price implications. However, with an incoming Trump administration signalling a reversal of this pause, the industry is poised for significant expansion in the coming year.
Diversified Energy Company plc (LON:DEC) is an independent energy company engaged in the production, marketing, transportation and retirement of primarily natural gas and natural gas liquids related to its U.S. onshore upstream and midstream assets.
