February 16, 2024

On January 26, 2024, the Biden Administration announced a pause on pending decisions for permits to export liquified natural gas (LNG) to non free trade countries.  The pause is intended to give the U.S. Department of Energy (DOE) an opportunity to update the underlying analyses of economic, environmental, and national security considerations.

The Geopolitical Context

Since Russia invaded Ukraine, the US, EU, and UK have all announced restrictions on fossil fuel imports from the country. The conflict has stimulated interest in LNG as Europe seeks to offset declines in Russian gas supply.

For this reason, the global LNG market experienced a turbulent year in 2022 as Europe competed with Asia for LNG cargoes. Germany committed to building 5 new LNG import terminals to end their reliance on Russian pipeline gas. The first terminal, a Floating Storage & Regasification Unit (FSRU), opened in December. 2022, taking just 10 months to construct. In 2022, European regasification utilization jumped to 65%, up from 40% in 2021.

Global LNG trade grew by 7% between 2021 and 2022 to just over 400 mtpa with the increase primarily driven by European imports.  Global liquefaction capacity is projected to increase from 475 mtpa (62 Bcf/d) in 2022 to 685 mtpa (89 Bcf/d) in 2028 – an increase of over 40%.

US LNG Exports

Figure 1 shows U.S. LNG Projects by operational / approval status.

The US is the largest global exporter of LNG, accounting for 3/4 of new liquefaction capacity added in 2022, and with 2023 exports of ~12 Bcf/d. Exports are expected to rise to 25 Bcf/d in 2030 with Sabine Pass, Corpus Christi and Plaquemines Projects expected to represent about 45% of capacity.

In addition to 12.7 Bcf/d of existing LNG export capacity, 18.2 Bcf/d of new FERC approved capacity is under construction.  An additional 13.2 Bcf/d of LNG export capacity is already FERC approved, but not under construction.

If all FERC approved projects are built, total US LNG export capacity will rise to approximately 44 Bcf/d. To put this into context, total US L48 natural gas production in 2005 was only ~ 50 Bcf/d and the current global market for LNG is 62 Bcf/d.

The Impact of the U.S. LNG Approvals Pause

With over 30 Bcf/d of incremental approved capacity to potentially come onstream, it is unlikely the LNG Approvals pause will have any short to medium term effect on Global gas markets.

Incorrys believes commercial parties risking capital are best placed to assess markets and allocate resources to highest returning investments. The announced U.S. LNG Approvals pause may make for good politics during the current election cycle, but with no practical impact.