Why US LNG won’t stop flowing: The economics that won’t break in Oil & Companies News 12/02/2026 Since the Russian invasion of Ukraine in 2022, LNG developers and portfolio players have reaped the benefits of a gas shortage in Europe, generating enormous profit margins amid the rise of liquefied natural gas (LNG) as the dominant energy security fuel. Read this special insight from Kaushal Ramesh, VP, Gas & LNG at Rystad Energy and Mathieu Utting, Analyst, at Rystad Energy. Why US LNG won’t stop flowing: The economics that won’t break The average margin on a US Gulf coast (USGC) cargo destined to Europe, including regasification costs, was $4.56 per million British thermal units (MMBtu) between 2023 and 2025, or $17.5 million per one LNG vessel, compared to negative margins prior and during the pandemic in 2019 and 2020. These attractive profits have spurred national oil companies and majors, sovereign wealth funds, private equity, Asian utilities and other energy buyers to flock to the USGC with their checkbooks to get in on the action. As a result, a flurry of LNG final investment decisions (FID) has been undertaken during this period, both from greenfield and brownfield projects. The notion of the incoming LNG oversupply has deterred very few investors, despite rising risks of low prices. Yet, this bullish perception began to get questioned on 5 December when the TTF-Henry Hub differential collapsed to $4 per MMBtu, the lowest spread seen since April 2021. The industry reported squeezed margins, with TTF approaching the full costs of US LNG delivered to Europe (Figure 1), and fears of production shut-ins if the differential continued to drop. Historical context The only episode in the short history of the USGC LNG industry which saw broad LNG cargo cancellations was back in 2020 during the Covid-19 pandemic. Using this as a case study, Figure 2 shows that during 2019 and 2020, even with TTF always being below the full cost of US LNG delivered to Europe, facility utilization didn’t incur any declines. This is a result of fixed costs (pink bars) being considered sunk, while LNG offtakers are only concerned with covering their variable costs of transporting LNG (blue bars), also known as the short-run marginal costs (SRMC). This played out from April to August 2020, when TTF (white tick markers) dropped below the SRMC (blue stacked bars) of US LNG delivered to Europe for an extended period of time, during which we saw 150+ cargos cancelled and US LNG utilization plumet for a 5-month period. An important feature of this market mechanism is that LNG contracts mandate a 45 to 60-day notice period if the offtaker wishes to not lift a cargo, meaning that US LNG utilization lags prices by 1-2 months. That means that short stints of price compression between TTF and Henry Hub – for example, from simultaneous opposite extreme weather patterns in both continents – won’t be enough to shut-in LNG production in the USGC, beyond operational reasons and dominium’s optimization. SRMC is broken down into the following segments: 1) the cost of feedgas (Henry Hub); 2) 115% of the cost of feedgas to cover liquefaction losses and profit to the LNG developer; and 3) variable costs of shipping and regasification. While fixed costs include: 1) the tolling fee of LNG offtake contracts, which hovers around $2.5 per MMBtu; and 2) fixed shipping and regasification costs. Note that there is some nuance with shipping and regasification costs depending on business mo