The LNG Boom Is Just Getting Started

Here's what's next for the LNG markets.

Here’s something you may not know: The U.S. exported more LNG than any other country in 2024. That growth came from booming global demand and the rapid buildout of U.S. LNG export facilities.

But here’s the thing – there’s still plenty more demand on the way.

Reuters reports U.S. LNG output is set to more than double – from about 12 billion cubic feet per day (Bcf/d) at the end of 2024 to 27 Bcf/d by 2028. It could hit 40 Bcf/d later this decade.

Why such a big jump?

Because the world needs more energy. A lot more. According to the EIA’s baseline scenario, global energy use is on track to rise roughly 40% by 2050.

U.S EIA

Now, a good chunk of that rise in global energy use will be picked up by nuclear.

You know we’re big fans – it’s hands down the best source of reliable power out there.

Still, it’s not a silver bullet. It doesn’t work everywhere, or for everything.

Nuclear plants are big-ticket projects that take a lot of time and money to get up and running. They are great for providing steady, baseload power, but they're not so good at adapting quickly to changes in demand.

That’s where natural gas comes in. It’s flexible. You can use it for baseload, load-following, or peaking power – whatever the grid needs.

And since it emits about 60% less CO₂ than coal per unit of electricity, it doesn’t exactly clash with the environmental zeitgeist.

And in the U.S., it’s also abundant – and dirt cheap.

Put it all together, and natural gas is one of the best power generation sources out there today.

That’s why, over a decade ago, the U.S. started making the shift from coal to gas. Around the same time, oil and gas companies figured out how to unlock shale. Suddenly, a flood of low-cost gas hit the market.

That opened the door for power plants across the country to swap coal for gas. In fact, roughly 20% of all U.S. coal plants operating in 2011 have since been converted to natural gas.

But this is just the beginning…

Reports show that among 23 units at 15 plants scheduled to end coal use in 2025, at least six are set to convert to natural gas – and chances are, that number will grow. Just take a look at the chart below.

IEEFA

We see no reason to believe this trend will slow down anytime soon.

It’s all possible thanks to repowering – a process where coal plants are converted to run on natural gas. It’s a fairly straightforward swap: replace the old coal boiler with gas-fired equipment, and the plant gets a cleaner footprint and a new lease on life.

Natural gas now generates about 43% of U.S. electricity.

What’s more, what started in the U.S. is now spreading globally – thanks to the push for “cleaner” energy everywhere.

The Key Geopolitics of LNG

But here’s the thing you should know – most countries aren’t blessed with an abundance of natural gas.

In fact, around two-thirds of the world’s economically recoverable gas is concentrated in just four countries: the U.S., Iran, Qatar and Russia.

Even China, despite building out massive amounts of coal capacity to meet demand, is now the world’s leading importer of natural gas. In fact, in 2023, it surpassed Japan, bringing in around 71 million metric tons of LNG.

The U.S., meanwhile, is the opposite: the No. 1 exporter. We’ve gone from exporting virtually no natural gas to becoming the world’s largest LNG exporter in just six years.

And one big factor driving this shift is energy-starved Europe.

Historically, natural gas was tough to move – so it stayed a local market with local pricing. But thanks to LNG, U.S. producers can now reach massive, faraway markets without relying on pipelines. Europe included.

And let’s be honest – Europe needs American gas. Now, more than ever.

Case in point: Germany, the world’s third-largest economy.

German energy prices are atrocious. In fact, they’ve more than doubled since the 2000s. Today, the average household pays around 40 cents per kilowatt-hour, compared to just 13 cents in the U.S.

You’re probably thinking: what’s driving all this?

Well, Germany went all-in on green energy. Over the past two decades, it rolled out nearly 40,000 wind turbines and 3 million solar panels. And while that’s commendable, solar and wind can’t reliably cover the entire baseload. They’re just not always there when you need them. And that’s exactly why a stable grid can’t be based on weather.

And look, I like renewables. We believe there’s a place for them. But they still need something solid underneath it all. With the April blackout in Spain, that much should be obvious by now.

And in a move that still baffles many, Germany also turned its back on nuclear. The move had it shut down most of its fleet.

So, when the Ukraine war broke out, and Germany cut off Russian gas, there was no backup. That meant they had no cheap import options and nothing to fall back on. The country walked straight into an energy crunch.

Suddenly, LNG – at any price – became Germany’s best option.

The U.S. has led the way in supplying LNG to Germany ever since the country’s first terminal came online at the end of 2022. By 2024, American deliveries hit around 4.4 million metric tons – roughly 86% of Germany’s total imports.

Germany’s just one example. Demand for cheap U.S. gas is rising across Europe – and beyond, as countries look for affordable, stable and reliable supply. And that’s not slowing down anytime soon. It’s a major tailwind for top-tier U.S. natural gas producers.

Now, as the conflict with Iran is hanging in the balance turmoil in the oil markets could place even greater pressure on energy markets. We believe the fighting provides a bullish signal for the LNG sector – and that it is just getting started.

That’s why, this month, our Prinsights Pulse Premium analysis is unpacking one key firm we believe is in a prime position to leverage both geopolitical shocks and the longer-term energy landscape. If you’re not a Premium reader yet, upgrade here now to be among the first to see the new recommendation that’s being delivered later this week.