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.”
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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.
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