By Avi Salzman
One of America's hottest energy investments -- liquefied natural gas -- looks like it's on the brink of oversupply, and companies that are plowing money into it could run into financial difficulty in the years ahead.
Energy companies have been approving new LNG plants in Louisiana and Texas at a frenzied pace, with the backing of the Trump administration. At least five new or expanded plants to turn dry natural gas into liquid form and ship it overseas have gotten the green light for construction this year, and several more could be approved by the end of the year.
But companies are building so many facilities, at a time of rising supply- chain inflation, that they may have trouble selling their product at a profit when they open, said Shell CEO Wael Sawan in an interview with S&P Global Vice Chairman Daniel Yergin at the Economic Club of New York on Monday night. "The number of final investment decisions being taken surprises me if I'm honest, because it's at the higher end of the cost curve, yet those capacities continue to come in," he said. "So it's not economically fully rational."
Sawan would know -- Shell buys more U.S.-produced LNG than any other company, and sells it all over the world. He was responding to a question about Shell's plans to expand its LNG Canada terminal in British Columbia that it opened this year. The company is considering an expansion, but it will depend on how much competition it sees from other players, including in the U.S., and how much it will cost for an engineering firm to construct the plant. Shell doesn't want to open a new plant just as oversupply hits the market.
Sawan didn't single out any companies that are adding LNG capacity. Among the firms that have announced final investment decisions for plants in the U.S. this year are Sempra Energy, NextDecade, Cheniere Energy, Venture Global, and Australian company Woodside Energy.
In total, companies have announced final investment decisions on enough capacity to ship 75.2 billion cubic meters of LNG per year, more than any year in history and almost as much as was approved from 2020 and 2024 cumulatively, according to the International Energy Agency. Last year, the U.S. shipped 123 billion cubic meters.
Shell is very bullish on LNG, projecting that global demand will grow 60% by 2040. But there will be several ups and downs in the market on the way to that milestone, Sawan said in a discussion with Barron's after delivering his talk at the Economic Club. Deciding when to open a new facility is crucial. Opening when prices are weak means that companies may not be able to sell their LNG profitably.
Today, LNG sells for about $11 per million British Thermal Units overseas. "Some of these [new LNG] projects will not make money if LNG prices are at $7 or $8," Sawan said. "Which means they're not the most economically rational ones to get into first."
Sawan said that Shell will probably make a decision about expanding the LNG Canada project next year.
Write to Avi Salzman at avi.salzman@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
September 30, 2025 15:49 ET (19:49 GMT)
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