The U.S. liquefied natural gas (LNG) export industry is currently facing significant challenges that could impact its growth in the coming years. Factors contributing to this uncertainty include ongoing litigation from environmental groups, the recent bankruptcy of a key contractor, and a permit pause initiated by President Joe Biden. These issues are creating a complex landscape for project developers and exporters.
The Rise of U.S. LNG Exports
Over the past five years, the U.S. has seen a remarkable expansion in its LNG export infrastructure. This growth, coupled with flexible cargo destinations, has positioned America as the world’s leading exporter of liquefied natural gas. In 2023, U.S. exports increased by 12% compared to the previous year, reaching an impressive 11.9 billion cubic feet per day (Bcf/d). This surge is largely attributed to Europe’s urgent need to replace Russian pipeline gas. The Energy Information Administration (EIA) reported that U.S. LNG utilization averaged 104% of its nominal capacity and 86% of its peak capacity across seven operational terminals in 2023, driven by high international natural gas prices.
Looking ahead, the EIA projects that U.S. LNG exports will average 12.1 Bcf/d in 2024 and rise to 13.8 Bcf/d by 2025. Two major projects, Corpus Christi LNG Stage 3 and Plaquemines LNG, are expected to begin operations by the end of 2024.
Emerging Uncertainties
Despite these positive projections, delays are emerging for some fully permitted projects, independent of the current administration’s policies. The Golden Pass LNG export plant, a joint venture between ExxonMobil and QatarEnergy, has faced setbacks due to the bankruptcy of its construction contractor, Zachry Holdings. As a result, the project’s timeline has shifted to late 2025, with the Federal Energy Regulatory Commission (FERC) granting a three-year extension for construction.
Additionally, the Rio Grande LNG project, developed by NextDecade, is experiencing delays due to a recent court ruling. A U.S. appeals court vacated FERC’s authorization, stating that the commission failed to conduct a necessary supplemental Environmental Impact Statement during its review process. This legal challenge adds further uncertainty for developers in the LNG sector.
The Impact of Biden’s Permit Pause
Another significant factor contributing to uncertainty is President Biden’s decision to pause permitting for LNG projects until the Department of Energy (DOE) can update its impact analyses. This decision was made under pressure from environmental advocates, who seek a comprehensive review of the potential health and community impacts of such projects.
At a recent conference hosted by Wood Mackenzie, experts indicated that this permit pause may be viewed as either a minor inconvenience or a temporary setback for the U.S. LNG industry.
Looking Ahead: The 47th President
As the country approaches the presidential election in January, potential changes in leadership could clarify some uncertainties. Donald Trump has pledged to swiftly resume LNG permitting, while the future stance of a possible Kamala Harris administration remains unclear.
Analysts caution that a Trump administration might impose a 60% tariff on imports from China, which could provoke a retaliatory response from Beijing. Such actions could lead to reduced LNG purchases from the U.S. or cause China to re-sell American cargoes.
Post-election, many believe the permitting pause will likely be lifted. However, new requirements could emerge, complicating the authorization process for projects. The industry is calling for an end to the permitting freeze. Ryan Lance, CEO of ConocoPhillips, emphasized the need for permitting reform and additional infrastructure at the Gastech conference in Houston.
A Trump administration could ease regulatory burdens on the oil and gas sector, but the primary influences on U.S. hydrocarbon production are expected to remain the financial strategies of major energy companies, largely unaffected by political shifts. Even with a Republican in the White House, the environmental movement may gain momentum in U.S. courts, potentially resulting in additional delays for LNG developers due to new legal challenges.
Conclusion
The U.S. LNG export industry stands at a crossroads, facing a combination of growth potential and significant obstacles. As developers navigate these challenges, the outcome of the upcoming presidential election may play a pivotal role in shaping the future of LNG exports from the United States.
Related Topics: