U.S. President Joe Biden’s decision to pause approvals for new U.S. based liquefaction projects benefits similar projects around the world while casting doubts on U.S. LNG supply, TotalEnergies SE Chairman and CEO Patrick Pouyanné told analysts during the company’s fourth quarter of 2023 webcast.

“I would say that from this perspective, what has been done in the U.S. on the temporary ban is helping the other projects in the world. Because in fact, honestly, I am not suffering from it in our portfolio,” Pouyanné said Feb. 7 during the company’s webcast, responding to analysts' questions.

“The problem with this type of move, even if for an electoral campaign, and we know the story behind it, is that it is a question of trust in the capacity of the projects to deliver, and that's not very good,” Pouyanné said. “So it pushes these other buyers, these Asian buyers, [to] not only rely on the U.S. LNG, but to look to other locations.”

On Jan. 26, the U.S. Department of Energy (DOE) paused approvals for new LNG export projects. The move is temporary and doesn’t apply to already authorized exports of some 48 Bcf/d, according to the DOE. Extensions are not impacted. Even with the pause, U.S. liquefaction projects and associated exports are still set to almost double by the end of this decade, according to the DOE.

Pouyanné said TotalEnergies’ Energia Costa Azul project in Mexico, which will tap LNG feed gas from the Permian Basin, should be online by mid-2025. TotalEnergies has a 16% interest in the project and has access to almost 55% of the production, 1.7 million tons (MMton) “very well-located to go to Asia,” Pouyanné said.

At TotalEnergies’ Rio Grande LNG project in South Texas, which is using Bechtel to advance its development, the Paris-based company has all the authorizations and no problems related to the temporary ban, Pouyanné said.

Pouyanné said the French company would more or less not participate in the wave of U.S. mergers and acquisitions, responding to an analysts' question on the company’s U.S. strategy.

“I’m not a consolidator of shale in the U.S. … I can perfectly understand what our peers have done, but we are not in that business. But we have the balance sheet in order to be active on both sides … buying and divesting. That's the philosophy,” Pouyanné said. “The question for me is: is M&A is good if you buy at a good price, cheap price? That's all. So, we have time. I need the gas by 2027. I don't need the gas tomorrow morning.”

The company wants to hedge its LNG position in the U.S. with upstream gas, Pouyanné  said. “There are opportunities. But don't expect us to make a giant acquisition. We are shy people in the U.S., reasonable people.”

LNG market tension remains

Pouyanné said Mozambique and Qatar are to among the countries to benefit from Biden´s pause. China, with its large population and importance in the global economy, is expected to come back strong this year and over the near term, he said. Pouyanné added that China’s imports rose 11% to around 71 MMton in 2023 compared to 2022 but were still not back to their 2021 level of around 81 MMmt. 

“So, there is still room to grow. We see today that Chinese buyers are quite aggressive. You've seen them signing a number of long-term contracts. They still have a mandate to continue to sign some of them. … They are willing to diversify … their sources of LNG. And I would not be surprised to see, in particular, when JKM is around $10/MMBtu like it is today, it’s a good driver, and I would not be surprised to see China coming back to 80 [million tons] in 2024,” Pouyanné said.

The Japan Korea Marker (JKM) is the LNG benchmark in Northeast Asia, while the Title Transfer Facility (TTF) is the European benchmark in the Netherlands.

In Europe, imports of LNG were around 113 MMton-114 MMton in 2022 compared to around 65 MMton in 2021. The imports replaced Russian gas displaced due to Moscow’s decision to invade Ukraine, Pouyanné said.

“That has been a big shock in the market, which is being absorbed. [In] 2024, we expect better demand. In fact, the tension will remain because the LNG capacity increase is limited. Not much new capacity is coming on stream,” Pouyanné said.

“In fact, you have a tension in the market, and if any of these plants has a problem, like we had at Freeport two years ago, again, the tension will come back in the market. So, my message on LNG: prices are lower, good for demand—in particular in Asia and China. Limited additional supply in 2024, and in fact, I think this message will be repeated for 2025. It's only by mid-2026, 2027 that really we'll see more supply coming on stream,” Pouyanné said.

TotalEnergies, which is celebrating its 100 years in 2024, is forecasting LNG sales above 40 MMton in 2024, split between equity (30%), long-term supplies (40%) and spot (30%), Pouyanné added. TotalEnergies’ LNG sales were 44 MMton in 2023, the company revealed in its fourth quarter 2023 financial statements.

LNG portfolio strategy

In the last two years, TotalEnergies has engaged in an energy transition strategy anchored by two pillars: oil and gas (mainly LNG) on one side and integrated power on the other. TotalEnergies’ plan is to leverage its portfolio with its U.S. exports and regasification capacity in Europe to develop a top-tier LNG pipeline, the company’s CFO Jean-Pierre Sbraire said in his opening remarks during the webcast.

TotalEnergies’ LNG portfolio is a mix of long-term supply coming from its assets or third parties, and of long-term sales mostly in Asia, Stéphane Michel, the company’s president of gas, renewables and power, confirmed during the webcast.

“Basically we have a long-term portfolio where we buy Henry Hub and fixed cost, and we sell partly Brent, partly JKM and TTF. And then we have a global optimization with plenty of optionality in the portfolio. One of the big ones is to be able to switch from Europe to Asia and from Asia to Europe. But you have as well plenty of other plays like the backwardation, the contango, the arbitrage of timing, the possibility between Africa, Latin America and Asia and so on,” Michel said.

In 2022, TotalEnergies benefited from the spread increase between Henry Hub and JKM and TTF, Michel added, but said that benefit would be less going forward as prices retreat.

Brazil replacing Russia

TotalEnergies’ portfolio in South America continues to offer upside potential, especially in the oil spaces in Brazil and Suriname.

“On the major projects, we are progressing, in particular in Brazil,” Pouyanné said. “Brazil is replacing Russia.”

Pouyanné said its Mero 2 project came online the last day of 2023 while Mero 3 is still slated to start up by the end of 2024. Mero 4 is slated to start up in the second half of 2025, he added.

Offshore Suriname, in Block 58 where TotalEnergies is partnered with U.S.-based APA Corp., Pouyanné said the project will target resources from the Krabdagu and Sapakara finds and produce 200,000 bbl/d from an FPSO.

“So, it's an important project. The objective being to sanction it before year-end 2024, and we are working on it,” Pouyanné said, adding that the criteria to sanction projects included looking at the profitability at $50/bbl and emissions that need to be less than TotalEnergies’ portfolio average, which was 20 kg/bbll in 2020.

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