Energy and LNG Trade Dynamics

The role of liquefied natural gas (LNG) in the global energy sector has grown significantly,
as trade volumes have surged to new heights driven by higher demand and varied supply
options. This article investigates the global LNG situation, drawing insights from recent
academic and institutional analyses. The report investigates LNG supply and demand trends,
geopolitical impacts, infrastructure developments, pricing approaches, environmental issues,
and the long-term vision for the LNG industry. The literature reflects a common view that
LNG demand is expected to increase in the near future, especially due to the needs of
emerging Asian markets and its role in providing cleaner energy security. Major exporting
countries are expanding their liquefaction operations, and many importing nations are
enhancing their regasification setups, often with floating units, to meet rising demand. The
crisis between Russia and Ukraine has prompted a realignment in gas flows, showcasing
LNG’s vital importance and exposing the market’s sensitivity to supply disruptions and price
changes. There is a gradual shift in LNG pricing and contract strategies towards more
flexible, market-oriented frameworks, although oil indexation still holds considerable
influence. Environmental aspects are central to LNG’s future; seen as a more sustainable fuel,
LNG is thought to facilitate the energy transition, but discussions continue regarding the
duration of its growth in relation to climate goals. Various studies emphasize LNG’s
increasing importance and robust fundamentals, yet there are contrasting views on the risks
of oversupply, long-term demand in a low-carbon future, and price stability. This study
indicates that LNG is likely to remain essential in the global energy sector, yet stakeholders
need to manage substantial uncertainties about market dynamics and climate issues.
Keywords: energy, lng, trade dynamics, supply and demand, policy, geopolitical factors.
2
Introduction
As nations pursue dependable and environmentally friendly fuel options for electricity
production, industrial use, and heating, liquefied natural gas (LNG) has gained significant
importance in the worldwide energy sector. The last ten years saw a steady rise in global
natural gas usage, with LNG trade volumes reaching new peaks. The development of LNG
has connected gas supplies to remote markets, helping importing countries reduce their
dependence on pipelines and improve energy security (Adekoya et al., 2024). The modern
LNG market has developed into a global entity, moving away from its previously regional
focus. Traditionally, LNG trade was divided between the Asia-Pacific and Atlantic regions
with minimal interaction, but since the 2000s, a more integrated global market has
developed, merging previous regional boundaries (CLDP, 2017). East Asia’s key consumers
(Japan, South Korea, China, Taiwan) and Europe are tapping into shared supply pools, with
new importers from other regions joining the LNG buyer network (Presley, 2023). Advances
in technology and investment have opened the door for additional countries and companies to
join LNG exports, expanding liquefaction capacity throughout the Atlantic, Middle East, and
Asia-Pacific areas (Zou et al., 2022).
Expanding LNG trade presents complex dynamics, driven by a costly and geopolitically
sensitive supply chain from gas extraction to distribution (Commodity Technology Advisory,
2021). LNG markets are impacted by supply-demand factors, global politics, infrastructure
challenges, contracts, and environmental policies. The 2022 invasion of Ukraine by Russia
exemplifies this, prompting Europe to shift from pipeline gas to LNG, which strained supply
and caused price volatility (Presley, 2023). The climate commitments of governments and the
global decarbonization movement cast doubt on LNG’s future as a fossil fuel. While natural
gas produces less carbon dioxide than coal or oil, its continued use must comply with mid-
century carbon reduction goals, and methane leakage raises environmental concerns (Botão
et al., 2023).
4Izem Osma_Energy and LNG Trade Dynamics