Global LNG market faces supply deficit and higher prices

The global LNG market, which was set to be loose in the second part of this decade, is instead set to get tighter and could even see annual supply deficits as a result of likely delays in the development of LNG projects in Mozambique due to the country’s worsening security situation, a Rystad Energy report reveals.

Mozambique was once poised to catapult into the upper ranks of global LNG producers by the middle of this decade, but Total’s recent force majeure declaration signals indefinite delays on its onshore Mozambique LNG complex. The violent insurgencies also threaten ExxonMobil’s yet-to-be sanctioned Rovuma LNG. Together the two projects represent 28mn t/y of LNG capacity.

The market could see up to 9mn t/y of supply removed between 2026 and 2030, disrupting global balances. Rystad Energy had previously forecast a largely balanced market in 2026, but now there could be more competition for available volumes that year, leading to an upside risk in prices and higher price volatility, it says.

Similarly, the loose market conditions of 2027–2028 that the market analyst had originally forecast could become more balanced if Rovuma LNG’s 15.2mn t/y of potential capacity is unavailable. Finally, across 2029 and 2030, the market could tighten again and face supply deficits amid an expected surge in global LNG demand, as Rovuma LNG may only reach plateau production after 2030.

‘The ongoing insurgency in the Cabo Delgado region, while initially seeming manageable, appears to have dented Mozambique’s LNG dreams. We now expect Total’s Mozambique LNG to start production in 2026, with construction unlikely to resume without demonstrably stronger security arrangements at the Afungi site. Rovuma LNG may be delayed enough to mean it is brought online only around 2029,’ says Kaushal Ramesh, an LNG analyst at Rystad Energy.

In its updated forecast, which accounts for delays in the two projects in Mozambique, Rystad Energy now expects an oversupply of 4mn t/y in 2026, down from its previous forecast of 6.4mn t/y. The impact of the delays will grow in 2027, causing the expected oversupply to shrink to 11mn t/y from a previously forecast 15.9mn t/y. The largest downgrade is for 2028, with oversupply being limited to just 1mn t/y, down from 9.3mn t/y in its previous forecast.

If the expected delays materialise, 2029 will see an LNG supply deficit of 5.6mn t/y instead of a previously expected surplus of 2mn t/y. The effect will persist but will start smoothing out from 2030, with an expected supply deficit of 1.7mn t/y instead of a surplus of 1mn t/y.

The delays for both Mozambique LNG and Rovuma LNG is sobering news for LNG buyers and sellers alike. Mozambique has a large, low-cost resource base – making its LNG projects highly competitive – and the country is conveniently located to serve upcoming demand in Asia.

Rystad Energy forecasts a tightening LNG market between now and 2024 as demand continues to grow, driven by new regasification capacity and more gas-power generation, resulting in Asian spot prices reaching $8.5/mn Btu. With a strong pipeline of liquefaction projects under construction, the market analyst previously expected that a new wave of supplies coming into the market around 2025 would create a downward cycle in prices, with the Asian spot price dropping to a level closer to the short-run marginal cost of US LNG of $5.7/mn Btu in 2027.

However, the potential delay of the Mozambican projects means that now there is an increasing risk of a prolonged period of tightness midway through this decade, and that lower prices could be seen one to two years later than previously expected. As a result, Asian spot prices could remain above $8/mn Btu in 2025. The downside risk in prices between 2026 and 2029 is also reduced by a better-balanced market – while prices are still expected to decline, there is higher likelihood for them to remain above $6/mn Btu in 2027, says Rystad Energy.

Figure 1: Global LNG balances – impact of delays in Mozambique’s LNG projects
Source: Rystad Energy