Five months into the Strait of Hormuz crisis, the question still being asked is the obvious one: will the gas keep moving?
It is not an idle question. When QatarEnergy declared force majeure in March, roughly one-fifth of the world's liquefied natural gas supply came off the market almost overnight. Last weekend brought the first sustained pause in hostilities in weeks, and oil promptly gave back much of its war premium. Yet the physical picture barely moved.
The QatarEnergy-controlled Al Areesh transited out of the Strait of Hormuz on July 29, becoming the first LNG carrier recorded leaving the strait since July 11. QatarEnergy has begun extending force majeure notices into mid-October, and Asian spot prices remain at their highest levels in more than three years.
Market attention has focused on cargo delays, shipping disruption and price. As always, the discussion centres on supply. But the real significance of this crisis lies elsewhere. It has exposed a much larger challenge for the LNG industry, one that extends well beyond a single waterway or a single war.
The industry has entered a period in which supply risk and demand risk are rising at the same time. That is a situation LNG has rarely faced.
For most of its modern history, the business rested on two assumptions. First, that once liquefaction capacity was built, supply could reliably reach global markets. Second, that demand would keep growing strongly enough to absorb it. Both assumptions are now in doubt.
Supply's uneven recovery
On supply, the record of the past five months is genuinely mixed. The International Energy Agency estimates that new production from North America and Africa, along with improved output from legacy producers, replaced about three-quarters of the lost Gulf deliveries between March and June. That is an impressive demonstration of the system's growth in capacity and consequent flexibility. It is also a reminder that the remaining quarter had nowhere to come from, and that a fifth of global supply still depends on 21 miles of contested water.
A market can be well supplied and still be vulnerable. Even where cargoes ultimately arrive, repeated threats carry economic consequences. Shipping costs rise. Insurance premiums climb. Buyers who paid $10 per million British thermal units (MMBtu) in January have paid $20 to $22/MMBtu for much of July. Prices now move several per cent in a day on a single headline. Confidence erodes long before any molecule fails to arrive.
Demand starts to shift
At the same time, the crisis is quietly reshaping demand. Every geopolitical shock strengthens the case for alternatives. Governments concerned about energy security accelerate investment in renewables, electrification, storage and domestic resources. Or indeed choose to stick with coal. Industrial consumers seek control over energy costs. Utilities look to reduce exposure to imported fuels.
Demand destruction rarely announces itself. It accumulates through thousands of decisions by policymakers, investors and consumers. But sometimes an external shock to the system, in this case a war locking away the world's second largest LNG exporter, has profound immediate effects.
Gas Strategies now sees a scenario where global LNG demand falls 8 per cent between 2025 and 2026. This is on the assumption that LNG exports from the Arabian Gulf remain significantly below capacity for the rest of the year, an assumption QatarEnergy's own force majeure notices, now stretching into mid-October, appear to share.
Shell's latest outlook saw flat trade in 2026 only if shipping through the strait returned to normal this summer, and a rare annual contraction if it did not, noting that export facilities need six to eight weeks to ramp up once transit resumes. That summer window has all but closed. Either way, this would be the first year without growth in more than a decade.
Wave of new capacity
Set that against what is coming. The industry is entering the largest wave of capacity additions in its history, with around 207 million tonnes of new annual supply capacity expected by 2030, based on projects that have committed investment and begun construction. On a market that traded 422 million tonnes last year, that is almost half of today's trade arriving within four years.
Which raises an uncomfortable question. What if the industry's challenge is no longer producing enough LNG, but ensuring enough customers want it?
Peak LNG demand in the mid-2030s has been treated by many as a downside scenario. As geopolitical risk becomes a permanent feature of global trade, it becomes steadily more plausible. The irony is striking. The same forces creating anxiety about security of supply are accelerating the effort to reduce dependence on imported gas.
Producers must now ask whether future demand growth justifies continued expansion. Buyers must ask whether long-term supply can be relied upon in a fractured world. Both sides of the market are confronting questions of security at once. That demands an evolution in business models.
Trust as the new currency
Historically, LNG companies succeeded by securing reserves, building plants and delivering cargoes efficiently. The winners of the next decade will be those that help customers manage uncertainty. They will provide flexibility alongside supply. They will combine molecules with logistics, storage, portfolio diversification and risk management. In a market where supply may be abundant, but confidence is scarce, customer relationships become strategic assets. Players who have the buyers will own the market.
That is why demand security is becoming as important as supply security. For most of the industry's history, security meant ensuring access to molecules. Increasingly, it will mean ensuring those molecules have a reliable home.
None of this calls LNG's future into question. In conversations across our client base, from producers to portfolio players to buyers, nobody doubts that gas remains essential to the global energy system for decades to come. What has changed is the nature of the race. The next phase of LNG will not be defined by who builds capacity fastest. It will be defined by who manages uncertainty best.
The LNG market of the coming decade will not be shaped solely by molecules, infrastructure or price. It will be shaped by trust.
Pat Breen is chairman and chief executive of Gas Strategies
