This article was published by The Energy Mix on Dec. 16, 2025.
By Mitchell Beer
A drop-off in Asian and European demand for liquefied natural gas (LNG), just as a wave of new production facilities come online, is raising questions about whether demand will ever materialize for a fuel that investors have spent eye-watering sums to bring to market.
In Asia, LNG demand “is on pace to fall by 5 per cent in 2025 as high prices and ongoing trade tensions constrain the region’s appetite for the fuel,” the Institute for Energy Economics and Financial Analysis (IEEFA) reported earlier this month. In the European Union, the utilization rate for LNG terminals has stood around 50 per cent for most of this year, wrote Ana Maria Jaller-Makarewicz, IEEFA’s lead energy analyst for Europe, in a recent LinkedIn post, and demand between July and September, 2025 was down 9 per cent compared to the same period last year.
In October, IEEFA projected that European gas demand will fall 15 per cent and imports will drop 20 per cent between 2025 and 2030, after LNG imports from the United States and Russia reached a record high in the first half of this year.
“Recent International Energy Agency projections, based on static, conservative energy policies and a slower energy transition, are bolstering industry optimism for LNG’s role in Asia’s energy future.” IEEFA analysts Christopher Doleman and Sam Reynolds add that the drop “comes as the world’s LNG export capacity is on track to grow at the fastest rate on record, and the global gas industry remains unwaveringly optimistic that rapid, sustained demand growth in key Asian markets will absorb new supplies.”
But shifting demand in Asia “challenges this investment thesis and demonstrates that Asian energy policies are not static,” the two analysts write. “Instead, they are constantly responding to LNG barriers—including volatile prices, an economic slowdown, infrastructure challenges, gas turbine shortages, and energy security risks—in ways that may continue to limit demand potential, even in a lower price environment.”
Already, these policy changes undercut the “rosier” assumptions in the Current Policies Scenario, the high-demand outlook for oil and gas published this fall by the International Energy Agency after intensive bullying by U.S. Energy Secretary and former fracking executive Chris Wright. In July, Wright openly threatened to pull the U.S. and its funding out of the IEA if the Paris-based agency continued projecting a strong future for renewable energy.
“We will do one of two things: we will reform the way the IEA operates or we will withdraw,” Wright told Bloomberg in July. “My strong preference is to reform it.”
Sure enough, the IEA led off this year’s edition of its annual World Energy Outlook—the report it likes to style as the gold standard of energy modelling—with an energy futures scenario that presumes no change in national energy or climate laws, regulations, or policies through 2050, resulting in rising oil and gas demand through 2050 and 3°C average warming.
But “this past year demonstrates that policies in Asia are already responding to key LNG-related challenges in ways that could significantly slow demand growth,” Doleman and Reynolds write. China is leading the way, reducing its LNG imports 16 per cent in 2025, followed by Pakistan at 14 per cent, Thailand at 13 per cent, and India at 8 per cent.
Analysts in China also expect oil demand to plateau sometime between 2025 and 2030, Reuters reports.
‘It’s a Parts Issue’
Part of the problem, IEEFA says, is a chronic shortage of the gas turbines that operators need to generate electricity from the LNG they receive. Philippines cancelled a 1.1-gigawatt LNG-to-power project that had been backed by U.S. financial behemoth Blackstone, and is unlikely to add new import capacity with its existing terminals running below capacity. In Vietnam, investors asked for a two-year delay in a gas-fired power project because it couldn’t procure turbines.
And the problem extends beyond Asia. In March, The Energy Mix reported that Canadian utilities were seeing longer delivery times, higher costs, and tougher procurement logistics as they scramble to line up new gas turbines to help meet rising electricity demand.
“It’s a parts issue,” the Post and Courier headlined from Charleston, South Carolina, where the turbine shortage is one reason a new gas plant is doubling in cost, to $5 billion. Elsewhere, the U.S. Energy Information Administration reported that gas demand for power generation in the first eight months of the year fell 18 per cent between 2020 and 2025, despite an 8 per cent increase in electricity demand met predominantly by utility-scale solar.
“The public narrative around gas is changing,” Reynolds told a recent IEEFA podcast. “Five years ago, LNG and gas were widely viewed as clean, sustainable, and affordable sources of energy for Southeast Asian countries. However, we’re starting to see market disruptions erode pro-gas, pro-fossil fuel narratives, and the emphasis is now being shifted towards a more rapid deployment of low-cost renewables.”
Investors Prepare for a Fossil Phaseout
The emerging trends have investors preparing for a fossil fuel phaseout, We Don’t Have Time CEO Ingmar Rentzhog writes for Forbes magazine this week. He cites a new survey by the Morgan Stanley Institute for Sustainability covering 950 asset owners and managers across North America, Europe, and the Asia Pacific, 86 per cent of whom expect to increase allocations to sustainable investments over the next two years.
With 201 large asset owners and 73 large asset managers in the survey, “the survey is capturing decision-makers stewarding tens of trillions of dollars in aggregate, even before counting the rest of the respondents,” he writes. “This is how phaseouts happen in practice: not as a single political decision, but as a widening valuation gap.”
Rentzhog says last month’s COP30 climate summit in Belém was a powerful catalyst because—after fossil fuel lobbyists and petrostates blocked delegates from recommitting to an accelerated phaseout in the official conference declaration—more than 80 countries said they supported the move. Then Colombia and The Netherlands agreed to co-host an international conference April 28-29 in Santa Marta, Colombia, to move the agenda forward.
“This matters for markets because it reduces political ambiguity,” Rentzhog writes. “When a large coalition begins organizing around a phaseout timeline, investors do not need every major emitter to agree in order to start repricing risk. They need credible direction, momentum, and a pathway that can scale.”
Now, he adds, with the green economy now surpassing the $5 trillion mark, investors are starting to treat it as a “mainstream growth category, not a niche.”
For LNG, in particular, IEEFA says the trends point to the possibility of déjà vu, with the industry at risk of repeating the coal industry’s mistakes from decades past.
“In the early 2010s, the coal industry attracted a large wave of investment, banking on surging coal imports from China and India,” IEEFA Australia CEO Amandine Denis-Ryan wrote last month. “When this growth didn’t materialize, coal oversupply and depressed prices sent major companies bankrupt with significant value destruction for shareholders.”
Now, she added, “the LNG industry risks repeating the coal industry’s mistakes, as investment levels outstrip future demand, with potentially more severe consequences for the capital-intensive industry.”
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