New natgas projects to keep prices low

New liquid natural gas project approvals surged in 2025, adding to the coming wave of natural gas supply.

About 300 billion cubic metres of new annual LNG export capacity is scheduled to start operation by 2030. But questions remain about where all the new LNG will go.

Reports warn that the mad rush to build new LNG projects in the US is creating financial risks. Uncertain medium-term demand could result in too few buyers and a supply overhang. But one thing is sure: it will lead to low gas prices.

The spread between US and European natural gas prices is the narrowest since April 2021 and will become even lower as more LNG enters the market, reducing profitability of US LNG.

A major destination for US LNG – or about two thirds of it – is the EU that has now agreed to stop all Russian natgas imports by the end of 2027.

But there is a risk: EU LNG demand is in structural decline.

For the first time since mid-2024, European wholesale gas prices have dropped below $10/mmBTU, thanks to the abundance of LNG supply, and expected to drop to $8/mmBTU next year.

A question on everyone’s mind is: “Will a Ukraine peace deal really lure Europe back to Russian gas?” Probably not, but it may depend on how high LNG prices remain.

Nevertheless, and despite recent sanctions and EU decisions, there is still market uncertainty whether Russian gas will eventually come back to Europe. It is a 150 bcm question.

Saudi Arabia has started production at the giant Jafurah gas field, hitting 0.45 bcf/d in Phase 1. Aramco aims for 2 bcf/d by 2030 in what is the world’s largest unconventional gas project outside the US.

In Greece, the Hellenic gas transmission system operator, DESFA, said that all LNG unloading slots at Revithousa have been sold out over the 2026-2035 period.

This is an important milestone in Greece’s pursuit of becoming an LNG gateway for all of southeast Europe, while Greece has a ‘unique ability’ to receive US energy exports.

Egypt is finalising a $4 bln US LNG import contract, while its recent deal to double natgas imports from Israel is facing uncertainty.

Egypt is planning to revive upstream growth in the Mediterranean and the Nile Delta. It announced a 5-year exploration master plan that will channel $5.7 bln in investments to drill 480 new wells by 2030, a strategic pivot designed to reverse production declines.

Italy’s Eni is adding to this. It is planning to invest $8 bln in Egypt over the next five years, focusing on the development of existing offshore gasfields and further exploration activities.

The $35 bln deal to export Leviathan gas to Egypt has been paused by politics. There are three pressure points: Egypt’s ability to pay, Israel’s internal gridlock, and Washington’s shift in posture, with an increasing risk that it could be cancelled. The project partners have given themselves until 31 December to obtain an export permit from the Israeli energy ministry.

But Qatar is offering Egypt ‘unlimited’ gas as Israel stalls this megadeal. This will help Egypt diversify its suppliers and avoid dependence on a single country, as well as ensure supply security.

Cyprus and Lebanon have signed an offshore EEZ demarcation deal that should help Lebanon to resume exploration for natural gas.

It is consistent with the American energy policy for the region which requires the settlement of open issues, especially EEZ delimitations, and the Mitsotakis call for a 5×5 meeting to resolve maritime disputes around the East Med.

The EU agreed a full ban on all Russian piped gas imports by autumn 2027, with earlier phaseout dates for LNG and short-term supply contracts.

The EU is working to regulate TurkStream gas out of Europe and a draft regulation was issued in October.

A backlash against environmental regulation is in full swing in Europe, with political groups from the centre to the far right intent on watering down laws that were often only recently agreed.

Europe slashed carbon emissions faster than any region in the world. But according to the WSJ, political consensus is cracking, industry is hobbled and high-profile projects are being postponed thanks to some of the highest electricity prices in the developed world.

But despite this, the EU is largely sidestepping the debate about the very expensive commodity that’s truly killing its manufacturing industrial base: electricity.

Europe’s soaring electricity prices — now among the highest in the world — are forcing governments to rethink anti-oil and gas policies, as voters rebel against sky-high prices.

Indicative of the problems, power generation from fossil fuels in Germany has climbed to its highest level in almost nine months, as a spell of cold weather and weak wind strained electricity supply. Prices jumped to €313/MWh in November.

European Central Bank president Christine Lagarde warned that Europe’s development is based on “a fast-disappearing world”.

European chemicals have gone from breaking bad to breaking worse, as high feedstock and energy costs make them uncompetitive.

There is a renewed drilling push in the EU. The change in tack in Greece, Italy, Germany, Netherlands and Britain reflects a new paradigm shaped by the 2022 energy price shock: an acceptance that fossil fuels will remain a key part of the energy mix for decades.

Europe is being asked to repeal its growth-killing Corporate Sustainability Due Diligence Directive. To recover and reindustrialise, the EU must have access to secure, reliable and affordable energy.

QatarEnergy and ExxonMobil executives warned Europe they may exit over this climate law. It requires companies operating in the EU to address human rights and environmental risks across their supply chains, and aims to hold them accountable for harm even outside Europe.

EU vice-president Teresa Ribera said Europe must be a rulemaker, not a rule-taker.

This is correct, but Europe must first step down from being regulation-driven and prioritise lower prices, especially energy, the economy and competitiveness. At present this is lacking, to the EU’s detriment.

Concerns about Europe’s industrial decline have crescendoed thanks to stubbornly high energy prices, the onset of Trump tariffs and cheaper Chinese goods reaching the EU market.

Can Europe meet its electrification potential? Electrification has been stuck stubbornly at about 22-23% of final energy use for more than five years. Energy costs are still between two to five times higher in the EU than in the US or China. Electricity is not affordable in Europe.

The US has developed a comprehensive energy policy that includes southeastern Europe and the Mediterranean. This was presented at a high level at the P-TEC conference in November in Athens, placing Greece at the centre of it.

ExxonMobil and Chevron acquired new acreage offshore Egypt and Greece. This is part of a wider US interest in the region centred around energy, evident from the P-TEC conference in Athens.

Finally, Trump’s energy power play is imperiling Russia-Turkey ties. The Vertical Gas Corridor – from Greece to Ukraine – gives the US a conduit to fuel central and eastern Europe, while undercutting viability of a Russia-Turkey hub plan.

Dr Charles Ellinas is Councilor, Atlantic Council

X: @CharlesEllinas

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