By Curtis Williams
HOUSTON (Reuters) -U.S. liquefied natural gas developers are on track this year to ink the second-highest annual number of binding sales contracts, despite industry concerns about increasing capacity and rising costs.
In the first 10 months of 2025, U.S. LNG producers signed sales and purchase agreements (SPAs) for 29.5 million metric tonnes of LNG per year, more than four times the 7 mtpa signed in all of 2024, data from consulting firm Rapidan Energy Group shows.
The SPAs are used by project developers to raise financing by demonstrating that planned projects can generate positive cash flow with customers locked into contracts for as long as 20 years. The only time more binding agreements were signed by U.S. exporters was in 2022, when Russia invaded Ukraine, according to Rapidan Energy.
Many buyers seeking to diversify away from Russian energy are willing to pay higher liquefaction fees that American LNG developers charge to convert natural gas into a liquid that can be easily transported around the world in specialized ships.
Companies with LNG trading portfolios are also picking up volumes from American producers.
GROWING US LNG OUTPUT STOKES FEARS OF GLUT
President Donald Trump returned to office in January with a pro-oil and gas agenda. He has promoted LNG deals in trade talks with Europe, which agreed to buy $750 billion in energy from the U.S. His administration also lifted former President Joe Biden’s moratorium on new export project approvals.
A flurry of final investment decisions followed that will add new capacity totaling 61.5 mtpa of LNG to an existing export base of 120 million mtpa. Cheniere Energy, Venture Global, Sempra, Next Decade and Woodside Energy have all greenlit new facilities this year.
The U.S. Energy Information Administration expects the country’s overall LNG capacity to double by 2029. America could export one third of global LNG by 2030, according to the International Energy Agency.
Rapid expansion of U.S. LNG could result in a global glut, with the IEA predicting lower prices.
“As new supply comes to market, notably from the United States and Qatar, it should apply downward pressure on prices – offering welcome relief for gas importers worldwide,” said IEA Director of Energy Markets and Security Keisuke Sadamori.
Similar forecasts of lower LNG prices have come from producers including Total and Shell, yet some investors in new export facilities like Woodside and Venture Global say predictions of a glut are overstated.
“We’re very bullish on LNG demand for the long term,” Woodside CEO Meg O’Neill said at an event in September.
Venture Global CEO Mike Sabel predicts demand growth as data centers and more Asian countries replace coal with LNG for electricity generation.
“I think data centers are going to be a massive source of new incremental demand, but you are short today on gas production capacity,” Sabel told Reuters.
CONSTRUCTION COSTS RISING
Labor inflation caused by shortages of skilled workers and rising prices of equipment due to tariffs are increasing construction costs, according to Poten and Partners business intelligence head Jason Feer.
“Costs have increased up to 20% in some instances, and it makes some projects … uncompetitive,” TotalEnergies CEO Patrick Pouyanné said on an earnings call last month.
Venture Global has reported cost overruns at its 27.2 mtpa Plaquemines LNG facility, while Golden Pass, a joint venture between Exxon Mobil and QatarEnergy, is over budget and behind schedule.
To keep projects economically viable, developers have been seeking, and so far getting, liquefaction fees that are up around 15% on average from two years ago, Feer said.
Venture Global, considered a low-cost supplier, is charging $2.30 per million British thermal unit (mmBtu) for liquefaction in new contracts. The fee is higher than the $1.75 per mmBtu it charged for LNG out of Calcasieu Pass when that facility first contracted sales, two people with knowledge of its pricing told Reuters.
Cheniere Energy, the largest U.S. LNG producer, is charging a premium of over $2.75 per mmBtu. Woodside is offering 10-year contracts coming in at around $2.90 per mmBtu, said Feer, adding that fees across the broader market had averaged $2 per mmBtu in 2023.
HIGHER PRICES NOT STOPPING BUYERS
The window may be closing for more LNG projects to be developed in the U.S. at this time because of rising costs and the prospect of lower global prices, according to Rapidan Energy director of global gas Alex Munton.
“This bull run must come to an end, it cannot continue forever,” said Munton.
Still, buyers including ENI and Petronas are snapping up new long-term contracts even in the face of higher liquefaction fees and potentially lower spot prices.
JERA, one of Japan’s largest power generators, says it wants U.S. gas to diversify and avoid an over-dependence on Australia and to meet demand growth spurred by data centers and AI.
TotalEnergies’ Pouyanné said many large players are focusing on the bigger picture and locking in new volumes to trade, even if fees are rising. As the market grows, so do trading and arbitrage opportunities.
Even some easing of the market could still create opportunities for more price sensitive countries in Southeast Asia to move away from coal and boost global demand for LNG, the IEA said.
(Reporting by Curtis Williams in Houston; Editing by Nathan Crooks and David Gregorio)
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