China’s Declining LNG Demand Challenges Global Supply Growth

China, once the driving force behind global liquefied natural gas (LNG) demand growth, is now seeing its appetite for the fuel wane. This shift poses challenges for LNG producers who have relied on China’s import needs to justify massive infrastructure investments. The ongoing Iran war has reinforced China’s focus on energy security, pushing it to prioritize domestic gas production, pipeline imports, and renewable energy over LNG imports.

Analysts from JPMorgan, S&P Global Energy, and Wood Mackenzie have revised their projections for China’s LNG demand growth, cutting estimates by 14 million to 22 million tons for the early 2030s. Shell’s latest outlook also reflects a more conservative view, with LNG imports potentially peaking at 120 million to 150 million tons by 2035-2040, down from earlier projections of 146 million tons by 2030-2035.

The International Energy Agency (IEA) expects around 217 million tons of new LNG export capacity by 2030, but China’s reduced demand could render up to 10% of that capacity unnecessary. This could impact final investment decisions on new projects, particularly those with long development timelines and high costs. Henning Gloystein of Eurasia Group suggests that while some U.S. projects may still proceed, others could face cancellations due to China’s shifting energy strategy.

China’s energy diversification efforts, including increased pipeline imports from Russia and a push for renewables, further reduce its reliance on LNG. Domestic gas production has grown at an average rate of 9.5% annually over the past 25 years, while renewable energy expansion poses a structural challenge to LNG demand. Analysts note that China’s success in electrification and fuel stockpiling could lead to a steeper decline in gas demand than previously anticipated.