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The world’s biggest oil companies are expected to suffer a fall in liquefied natural gas revenues this year as the market volatility that drove big profits in the wake of Russia’s invasion of Ukraine ebbs.
LNG trading volumes have boomed to record highs since Russia’s invasion of Ukraine in February 2022 after the super-chilled fuel, transported by sea, replaced much of the pipeline gas that previously flowed from Moscow to Europe.
But analysts expect LNG trading revenues, which are driven primarily by price volatility, to fall in 2025 as markets calm after the price swings caused by Russia’s invasion and the subsequent energy crisis.
The trend will affect oil majors such as Shell, BP and TotalEnergies in Europe and ExxonMobil and Chevron in the US. All five groups have big LNG businesses that have benefited from the whipsawing prices that contributed to record profits in the industry.
“Volatility has fallen in recent months and starts the year below previous ones. Last year was lower than 2023, which was lower than 2022,” said one LNG trader.
The Title Transfer Facility, the European gas benchmark often used for LNG contracts in the region, traded at a high of more than €300 per megawatt hour and a low of €65/MWh in 2022. In 2024, the range narrowed to between €50/MWh and €22/MWh.
“LNG traders care about volatility. If you’re 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,” said David Hewitt, a consultant at Hewitt Energy Perspectives.
“For the international oil companies, especially the European ones, LNG is certainly a key component of their earnings.”
Citi forecasts that Shell will make 21 per cent of its cash flow from LNG sales this year, while Chevron will make 18 per cent, TotalEnergies 14 per cent, ExxonMobil 12 per cent and BP 10 per cent.
Some industry groups are also predicting that an oversupply of LNG will send prices lower.
Rystad Energy, a consultancy, expects supply to outstrip demand in 2027 and that this will continue for several years as more US projects come online and Qatar, the third-largest LNG exporter, boosts production.
Shell is the biggest LNG player, excluding state-owned oil and gas companies.
Shell said in a trading update this month that it expected LNG volumes to have fallen in the final quarter of 2024 compared with the previous three months.
The majors, especially Shell and TotalEnergies, are preparing for oversupply by increasing LNG contracts tied to the price of oil rather than gas, said Christopher Kuplent, research analyst at Bank of America.
Shell chief executive Wael Sawan insisted when the company announced its third-quarter earnings that the LNG business would continue to drive profits, even if prices fell in the second half of the decade.
“Some of the volatility in 2022 and 2023 is gone for the time being, but if you look at the geopolitical state of the world, the prospect of something happening or something going wrong that impacts the LNG market still looks relatively high,” said Frank Harris, head of global LNG consulting at Wood Mackenzie.
BP and Shell declined to comment on their LNG revenues. TotalEnergies, ExxonMobil and Chevron did not respond to requests for comment.
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