The world’s largest oil companies are bracing for a drop in liquefied natural gas (LNG) revenues in 2025 as price volatility in the market diminishes. Following Russia’s 2022 invasion of Ukraine, LNG trading volumes surged to record levels, driven by the fuel’s critical role in replacing Russian pipeline gas to Europe. However, analysts and industry experts predict that the calmer market environment will reduce profit opportunities, according to a report from the Financial Times (FT).
The European gas benchmark, the Title Transfer Facility (TTF), exemplifies this trend, with its price range narrowing significantly. In 2022, TTF traded between a high of more than €300 per megawatt hour and a low of €65/MWh. By 2024, this range had shrunk to between €50/MWh and €22/MWh.
“LNG traders care about volatility,” noted David Hewitt of Hewitt Energy Perspectives. “In a flatter volatility environment, it doesn’t matter how good or bad your traders are; it’s going to be harder to make huge amounts of money.”
The cooling market is expected to impact earnings at major oil companies with substantial LNG operations, including Shell, BP, TotalEnergies, ExxonMobil, and Chevron. LNG trading had been a key contributor to their record profits during periods of heightened price swings. For example, Shell, the largest LNG trader outside state-owned companies, is forecast to derive 21% of its cash flow from LNG sales in 2025, while Chevron and TotalEnergies are expected to earn 18% and 14%, respectively, according to Citi.
In preparation for a potential oversupply of LNG later in the decade, companies like Shell and TotalEnergies are pivoting to contracts linked to oil prices rather than gas. This strategy aligns with forecasts from Rystad Energy, which anticipates that LNG supply will outstrip demand by 2027 as new US projects come online and Qatar ramps up production.
Shell, which recently announced lower LNG volumes for the final quarter of 2024, remains confident in its long-term profitability in the LNG sector. Chief executive Wael Sawan emphasized during the company’s Q3 earnings call that LNG would continue to drive earnings, despite the more subdued market conditions.
The Financial Times highlighted that while the LNG market appears to be stabilizing, geopolitical risks still loom. Frank Harris, head of global LNG consulting at Wood Mackenzie, pointed out that the “prospect of something happening or something going wrong that impacts the LNG market still looks relatively high.”
