The future of the United States natural gas sector hangs in the balance as a cluster of competing variables cloud the crystal ball. The upcoming regime change in the United States is certain to significantly reshape domestic production, consumption, and export trends but myriad global factors make exact projections tricky.
U.S. exports of liquefied natural gas have slowed a bit this year after the Biden administration pumped the brakes on the sector’s previously breakneck growth. In 2023, the United States became the world’s biggest natural gas exporter, exporting a whopping an average of 11.9 billion cubic feet per day (Bcf/d) of LNG on average, representing a 12% increase from 2022. But on January 26th of this year, President Biden announced that the United States would pause approvals of new licenses to export LNG to give the U.S. Department of Energy the opportunity to review and assess whether the nation’s prodigious LNG exports are “undermining domestic energy security, raising consumer costs and damaging the environment.”
The pause has since been halted by a federal judge, but the sentiment has galvanized Biden’s political opponents to lean into LNG exports. Trump has long promised to swiftly overturn this pause, which came in part as a reaction to mounting evidence that liquefied natural gas may be much, much worse for the environment than previously thought, challenging its positioning as a “bridge fuel” in the global clean energy transition.
When Trump enters the oval office he is sure to ramp up exports, but this action will not be immediate. “It will take time for the Department of Energy (DOE) to re-staff and satisfy requisite legal and environmental reviews, despite Republicans’ likely control of both legislative branches,” said Wood Mackenzie chair and chief analyst Simon Flowers. “New permits might only be issued after the spring, enabling projects to [final investment decision] in the second half of the year.”
Increased imports could play a pivotal role in the United States’ trade negotiations with Europe, as the continent is looking toward diversified natural gas sources to help wean its economy off of its continued reliance on imported Russian energy resources. For developers, the idea of an expanded European market is encouraging news.
“We look forward to working with the incoming Trump administration to cement America’s role as the world’s leading supplier of clean liquefied natural gas,” Michael Sabel, CEO of U.S.-based developer was recently quoted by the Financial Times. “In recent years, Europe has moved swiftly to build out the necessary infrastructure needed to support a surge of LNG into the region and with the necessary policy support and regulatory certainty the United States is well positioned to meet that long-term demand,” he said.
However, the Trump presidency will also usher in a new era of tariffs, which will likely have a great impact on natural gas markets around the world. Reuters reports that these tariffs could go so far as to undercut the Trump administration’s goals to ramp up exports, as “China might reciprocate by avoiding new contracts and re-exporting U.S. cargoes to other nations.”
Moreover, the United States is facing increasing competition from other natural gas exporters who are rushing to expand their own production and export potential. Guyana and Suriname are poised for an export boom and boast key advantages to export to Asian buyers. Mexico and Canada, too, have majorly expanded their own LNG sectors, with Mexico potentially on track to surpass Canada in the coming years. Increased natural gas exports from Mexico, coupled with a marked increase in pipeline natural gas shipments from the United States to Mexico are expected to boost natural gas prices up from their currently low levels in the coming years.
Source: By Haley Zaremba for Oilprice.com