U.S. President Joe Biden is straddling the line between environmental commitments and the need for energy security in recent moves targeting the North American LNG industry, which has a number of projects under construction or already approved.
The Biden administration formally paused new approvals for U.S. LNG export projects on Jan. 26, citing the need for enhanced oversight of potential environmental impacts.
But nearly 32 Bcf/d of planned capacity for already approved projects are not impacted, which would essentially triple existing U.S. nameplate LNG capacity if all of them are built.
“They have to balance the environmentalists who want to stop or limit these projects, and the energy security advocates who argue in favor of the U.S. supplying its allies with natural gas and other forms of energy,” said Sergio Chapa, Poten & Partners senior LNG analyst for the Americas, during a Jan. 24 webinar.
The pause only affects projects yet to be approved, so the global LNG market will not be impacted in the short term.
Average U.S. LNG exports are between 13 Bcf/d-14 Bcf/d. Ten U.S. projects under construction would double that over the next four years, Chapa said. “There’s a very robust market right now, but it's also one where these projects and these developers are facing pressures like inflation and labor.”
RELATED
FERC Says 32 Bcf/d in US LNG Capacity Approved, Not Yet Built
LNG from U.S. liquefaction plants that have already obtained approval will primarily target countries in Asia and Europe, which will drive demand, but right now both markets are well supplied.
China is still reluctant to commit to long-term prices or contracts at current levels as it waits for the market to soften, said Kit Ling Wong, Poten & Partners head of Asia Pacific, citing concerns around economic data and activity.
“And I think the general feedback is that [China] will probably wait for prices to fall a little before they will come in,” Wong said.
In terms of Europe, there’s a bearish outlook with regards to European fundamentals, said Piers de Wilde, Poten & Partners senior LNG analyst for Europe.
European storage levels are around 75% full with two months of heating season remaining, and shipping markets are fairly well supplied. Those dynamics persist despite geopolitical events in Gaza and the related spillover, which has impacted cargo and LNG shipments through the Red Sea and forced ships to revert to the longer Cape of Africa route.
Recommended Reading
What's Affecting Oil Prices This Week? (April 29, 2024)
2024-04-29 - Stratas Advisors says even with the reported drawdown in U.S. crude inventories, the price of Brent crude oil remains below the upward channel that had been in place since January of this year.
Hedge Funds Retreat from Oil as War Risk Fades: Kemp
2024-04-29 - Hedge funds and other money managers sold the equivalent of 95 MMbbl in the six most important petroleum futures and options contracts over the seven days ending on April 23.
Exxon’s Guyana Gas Project a “Win-Win,” Set for Hook-up by Year-end ‘24
2024-04-28 - Exxon Mobil Corp. CEO Darren Woods said the company’s gas-to-power project in Guyana is a “win-win proposition particularly for the people of Guyana” when completed and hooked-up by year-end 2024.
Segrist: The LNG Pause and a Big, Dumb Question
2024-04-25 - In trying to understand the White House’s decision to pause LNG export permits and wondering if it’s just a red herring, one big, dumb question must be asked.
Texas LNG Export Plant Signs Additional Offtake Deal With EQT
2024-04-23 - Glenfarne Group LLC's proposed Texas LNG export plant in Brownsville has signed an additional tolling agreement with EQT Corp. to provide natural gas liquefaction services of an additional 1.5 mtpa over 20 years.