US LNG expansion a double-edged sword with demand headwind

The global liquefied natural gas (LNG) sector is encountering an oversupply risk as rapid new export capacity intersects with subdued Chinese demand and rising geopolitical tensions. 

At Gastech 2025, held in Milan from 8 to 12 September 2025, natural resource data and analytics provider Wood Mackenzie assessed that individual US export projects may be commercially viable in isolation, but taken together, they threaten to outpace the market’s ability to absorb additional volumes. 

Chinese LNG imports fell by 18% in the period January to August 2025 compared with the same period of 2024, prompting questions over the world’s largest LNG market’s capacity to take on further supply. 

This decline reflects weaker-than-expected overall energy growth in China, which has struggled to maintain the momentum that underpinned import volumes in recent years. 

Concurrently, US LNG exports scheduled for a final investment decision (FID) in 2025 continue to increase, with further projects expected to reach this stage over the next 12–18 months.  

Wood Mackenzie noted that “each project taking final investment decision makes commercial sense individually, but collectively they risk pushing the market towards oversupply.” 

Structural shifts in China’s energy mix are compounding short-term demand weakness and clouding the outlook for sustained LNG growth. 

Beijing’s plan to construct the 60 GW Medog hydro project will introduce an alternative baseload supply, while expanded Russian pipeline imports via Power of Siberia and a rapid build-out of wind and solar capacity further constrain the requirement for LNG in the medium to long term. 

Meanwhile, US policy actions aimed at reducing Europe’s reliance on Russian gas and LNG have intensified geopolitical uncertainty in global markets. 

The US administration’s strategy to target Russian gas flows, deemed preferable to crude oil sanctions that could elevate prices, has prompted Russia to deliver Arctic LNG-2 cargoes to China and formalise a binding agreement for the Power of Siberia 2 pipeline. 

The huge development of LNG facilities on the Yamal Peninsula, forming part of Russia’s Arctic LNG-2 project, underscores Moscow’s determination to secure alternative LNG routes to Asia. The sprawling liquefaction trains vividly illustrate how Russia is rapidly scaling up Arctic export capacity — even as US policy seeks to curb its gas flows — providing a clear visual counterpart to the Power of Siberia 2 pipeline deal mentioned above. 

Such developments offer alternative supply routes for major importers but do not alleviate concerns over the concentration of global LNG sources.