‘Global LNG market faces supply deficit, higher prices from impact of Mozambique delays’

Rystad story 6 MayThe global liquefied natural gas (LNG) market is 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, according to Rystad Energy report

The market could see up to nine million tpa of supply removed between 2026 and 2030, disrupting global balances. Rystad Energy had previously forecasted 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.

Similarly, the loose market conditions of 2027-2028 that we had originally forecasted could become more balanced if Rovuma LNG’s 15.2 million tpa 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 only 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,” said Kaushal Ramesh, LNG analyst in Rystad Energy.

In our updated forecast, which accounts for delays in the two projects in Mozambique, we now expect an oversupply of four mtpa in 2026, down from our previous forecast for 6.4 mtpa. The impact of the delays will grow in 2027, causing the expected oversupply to shrink to 11 mtpa from previously forecast 15.9 mtpa. The largest downgrade is for 2028, with oversupply being limited to just one mtpa, down from 9.3 mtpa in our previous forecast.

If the expected delays materialise, 2029 will see an LNG supply deficit of 5.6 mpta instead of a previously expected surplus of two mtpa. The effect will persist but will start smoothening out from 2030, with an expected supply deficit of 1.7 mtpa instead of a surplus of one mtpa.

Effect on LNG prices

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. We estimate DES Asia break-evens of Mozambique’s LNG projects to range between US$5 and US$7 per MMbtu.

Mozambique LNG is underpinned by long-term contracts covering more than 85% of its production capacity. Its foundation customers include both end-users and portfolio players. With production now forecasted to commence in 2026, buyers expecting volumes in the tight market years of 2024 and 2025 may need to look for other sources of supply. This is likely to create upward pressure on prices as end-users search for alternative suppliers and portfolio players seek to cover short positions. Those without long-term contract coverage risk having to buy from an increasingly volatile spot market.

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 US$8.5 per MMBtu. With a strong pipeline of liquefaction projects under construction, we 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 US$5.7 per MMBtu 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 US$8 per MMBtu in 2025. The downside risk in prices between 2026 and 2029 is also reduced by a better-balanced market – while we still expect prices to decline, there is higher likelihood for them to remain above US$6 per MMBtu in 2027.

Alain Charles Publishing, University House, 11-13 Lower Grosvenor Place, London, SW1W 0EX, UK
T: +44 20 7834 7676, F: +44 20 7973 0076, W: www.alaincharles.com

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