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
NOG Closes Utica Shale, Delaware Basin Acquisitions
2024-02-05 - Northern Oil and Gas’ Utica deal marks the entry of the non-op E&P in the shale play while it’s Delaware Basin acquisition extends its footprint in the Permian.
California Resources Corp., Aera Energy to Combine in $2.1B Merger
2024-02-07 - The announced combination between California Resources and Aera Energy comes one year after Exxon and Shell closed the sale of Aera to a German asset manager for $4 billion.
DXP Enterprises Buys Water Service Company Kappe Associates
2024-02-06 - DXP Enterprise’s purchase of Kappe, a water and wastewater company, adds scale to DXP’s national water management profile.
Pioneer Natural Resources Shareholders Approve $60B Exxon Merger
2024-02-07 - Pioneer Natural Resources shareholders voted at a special meeting to approve a merger with Exxon Mobil, although the deal remains under federal scrutiny.
Parker Wellbore, TDE Partner to ‘Revolutionize’ Well Drilling
2024-03-13 - Parker Wellbore and TDE are offering what they call the industry’s first downhole high power, high bandwidth data highway.