Canada and Mexico are quickly moving to fill the gap left by the ongoing U.S. moratorium on new liquefied natural gas (LNG) export permits. This freeze, introduced by the Biden Administration in January 2024, has created an opportunity for these neighboring countries to enhance their export capabilities. They are investing tens of billions of dollars to meet the demand from Asian buyers while the U.S. remains inactive as the world’s largest LNG exporter.
On January 26, President Biden announced a pause on new LNG export license approvals. This decision allows the U.S. Department of Energy to assess whether current LNG exports are harming domestic energy security, increasing consumer costs, or negatively impacting the environment.
In response, Canada has acted swiftly to capture the opportunity. According to Rystad Energy AS, Canada and Mexico are planning approximately $63 billion in capital investments to boost their LNG export capacities. Kenny Stein, vice president of policy at the Institute for Energy Research, told the Financial Times, “Customers want alternative suppliers. They are happy to have more supply on the market from non-U.S. suppliers.”
From a climate perspective, increased LNG exports from Canada and Mexico are beneficial for global markets, especially for Asian buyers. However, these exports alone will not be enough to significantly reduce coal use in Asia. Nikkei Asia noted that large amounts of coal must be replaced to meet net-zero goals in the region, which will require substantial gas imports. The report emphasized that U.S. LNG offers a cleaner alternative for reliable power generation, complementing renewable energy sources.
Despite having smaller export capacities, Canada and Mexico may gain strategic advantages over U.S. suppliers that could enhance their ability to ship LNG to Asian markets. Both countries are planning to expand their LNG export infrastructure on the Pacific coast. This development could allow them to bypass the Panama Canal, which has become a significant bottleneck for LNG trade in recent years. Exporting directly from the West Coast would provide Canada and Mexico with easier and potentially cheaper access to Asian markets, which are projected to drive future growth.
Canada and Mexico are not alone in seeking to meet the demand from Asian buyers for new LNG sources. A floating natural gas project off the coast of Argentina is also in the works. BP’s Pan American Energy is looking to negotiate contracts with Asian consumers, joining other companies aiming to establish Argentina as a key player in the global oil and gas market. Notably, YPF, Petronas, and Tecpetrol are pursuing major projects in Argentina, which has the second-largest shale gas reserves in the world. Currently, Argentina is one of only four countries producing shale gas on a commercial scale, alongside the U.S., Canada, and China.
Once the U.S. lifts its permit freeze, the LNG market will look quite different. Exporters in Canada and Mexico could provide stiff competition for U.S. LNG suppliers due to their logistical advantages.
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