The global LNG market continues to grow, with increasing energy security demands and its status as a lower-carbon fuel. But geopolitical instability, trade tensions and looming supply overhangs threaten to disrupt that trajectory. Without decisive action, the industry risks repeating the costly missteps of oil refining in the late noughties, where underinvestment and eroded risk standards led to historic losses.
A Shifting Trade Landscape
The rise of protectionist trade policies, particularly among major economies, is already reverberating through global energy markets. While tit-for-tat tariffs have eased recently, broader geopolitical tensions — particularly between the US and China and across the Middle East — continue to complicate long-term energy planning, China, a key LNG importer, is actively diversifying its supply base, opening the door for non-US exporters to deepen ties with Asian buyers.
LNG’s long-term outlook remains positive, anchored in its role as a low-carbon transition fuel, but short-term volatility could undercut export ambitions, particularly for US producers betting on scale and pricing power.
Strong Fundamentals — But Not Guaranteed
LNG’s rise is underpinned by its ability to address the “energy trilemma,” the tension between energy security, affordability and sustainability, as explained by the World Energy Council. In developing countries where coal use is still growing, LNG offers a cleaner and more flexible alternative, especially where renewables remain inconsistent or expensive.
For energy companies, LNG also supports shareholder returns. Shell’s 2024 strategy update, for instance, reaffirmed its long-term emissions goals but flagged a more measured pace in its energy transition to preserve profitability. As a relatively low-emissions fossil fuel, LNG helps balance that equation, attracting capital while enabling credible decarbonization pathways.
From a risk standpoint, LNG also compares favorably with other hydrocarbon sectors. Its reliance on long-term contracts (often spanning 5–30 years) and strong design standards makes it more stable. Modern liquefaction plants are often built with redundant safety systems, real-time digital monitoring and artificial intelligence-powered performance monitoring, enabling proactive risk mitigation and high availability.
But this strong record cannot be taken for granted.
Threat of Oversupply and Underinvestment
The International Energy Agency’s World Energy Outlook 2024 projects a 47% increase in global liquefaction capacity by 2030. That growth, while promising, may outpace demand, depressing international gas prices and intensifying competition. We’ve seen how this story can play out.
In the past decade, the refining sector experienced a boom in capital investment, particularly in Asia and the Middle East, coinciding with a surge in US oil production. The resulting overcapacity reduced margins. As profitability declined, so did investment in maintenance and operational resilience. This had severe consequences: according to Marsh’s review of the top 100 hydrocarbon losses from 1974 to 2019, eight of the 50 largest property losses in the sector occurred in 2018-19 alone. The study identified a steady decline in engineering standards and a rise in both the frequency and scale of losses, particularly in ageing assets with deferred maintenance.
LNG operators today face a similar risk. Tolling contracts with tighter margins may lead to future reductions in capital expenditure, spare inventories and workforce investment. Without proactive action, an easing in operational standards could jeopardize both safety and financial performance.
What’s at Stake, How to Respond
The LNG sector can observe and learn from refining’s missteps. Even with more favorable fundamentals, the temptation to reduce spending during market downturns poses a systemic risk, especially when geopolitical instability and talent shortages are already putting pressure on operations.
This is where trusted partnerships with specialist risk engineers and insurers can play a critical role. Insurers with deep energy sector expertise can help operators benchmark risk standards, assess vulnerabilities and maintain critical risk governance even during turbulent times. These partnerships also enable capital access by underpinning insurance capacity, which is tied closely to safety performance and risk transparency.
Maintaining a strong workforce is equally vital. Many LNG facilities, especially on the US Gulf Coast, are in remote regions with limited ability to attract local talent. Operators are now competing globally for skilled engineers and plant managers. Retention and recruitment center on more than salary; investment in training, welfare and even community support are increasingly seen as essential components of operational resilience.
Collaboration between LNG operators in training pipelines and safety standards can further reduce systemic risk. As new projects enter operation and capacity grows, collective discipline will be key to maintaining high standards.
A Transition Fuel Worth Protecting
Despite current headwinds, LNG’s future remains promising. As both developed and developing nations transition away from coal and seek secure, flexible energy supply, LNG will remain a central part of the mix. But growth cannot come at the expense of resilience.
The lesson is clear: Capital alone cannot guarantee long-term stability. LNG operators must proactively protect their hard-earned safety record and financial performance by maintaining discipline in maintenance, workforce investment, and engineering standards. In doing so, they will not only preserve their competitive advantage but also solidify LNG’s role as a cleaner, more secure bridge to the future.
Ben House is director of energy at Markel International, an insurance specialist. The views expressed in this article are those of the author.