US slaps temporary ban on permits for new LNG export terminals
Quantum Commodity Intelligence – The US Biden Administration dramatically announced Friday a pause on approvals for new LNG export terminals, a move that could have a major impact on energy security for Europe in the future.
The announcement comes as Europe increasingly relies on soaring imports of LNG, particularly from the US, as it pivots away from Russian pipeline gas.
"Today, the Biden-Harris Administration is announcing a temporary pause on pending decisions on exports of Liquefied Natural Gas (LNG) to non-FTA countries until the Department of Energy can update the underlying analyses for authorizations," read the statement released by the White House.
"The current economic and environmental analyses DOE uses to underpin its LNG export authorizations are roughly five years old and no longer adequately account for considerations like potential energy cost increases for American consumers and manufacturers beyond current authorizations or the latest assessment of the impact of greenhouse gas emissions," added the statement.
In 2023, the US leapt past Qatar and Australia to take the top spot as the world's largest supplier of LNG, exporting a record 91.2 million metric tons of LNG in 2023, an increase of around 15% year-on-year.
European buyers pulled in around two-thirds of that volume, according to the US Energy Information Administration (EIA), which accounted for around 12% of America's dry gas production.
"The US is already the number one exporter of LNG worldwide – with US LNG exports expected to double by the end of this decade," read the statement, but added, "at the same time, the US remains unwavering in our commitment to supporting our allies around the world."
Initial reports that the Administration was planning such a move surfaced earlier in the month when Bloomberg said it was under consideration after a panel of government officials convened by White House climate adviser Ali Zaidi met to develop a policy recommendation on the instruction of President Biden.
Politico also reported that the DOE, which is responsible for issuing the export permits, would reassess whether it is properly accounting for the climate impacts from proposed LNG projects, as well as the national security and domestic economic consequences.
Projects
The US has five LNG export facilities under construction, which are not expected to be impacted by Friday's announcement, but several more permitted projects are awaiting a final investment decision.
According to Reuters, four projects with export approvals pending lodged at the DOE would be affected by the pause, citing an administration official although without naming them. The affected projects will likely be Sempra Infrastructure, Commonwealth LNG, and Energy Transfer ET.N.
Climate activists have already targeted Venture Global's Calcasieu Pass 2 (CP2) pending LNG project in Louisiana, which would be the nation's largest terminal.
The project is still waiting for Federal Energy Regulatory Commission permission, but given that it is a formality, the new ruling will also likely put CP2 on hold.
There was no immediate price reaction in US or European natural gas benchmarks, with the liquidity concentrated at the front of the curve.
In the US, the Mar22 Henry Hub contract on NYMEX was late morning Eastern time at $2.12/mmBtu, a 2% fall on the day, considered a normal price movement during a typically volatile market.
Traders said the move was likely a result of Freeport LNG saying it expects one of the three gas liquefaction units at its Texas plant to be out of service for several weeks after facing technical issues during Winter Storm Heather.
In Europe, Benchmark TTF futures for Mar24 were up 1.4% on the day at €28.17/MWh during late-afternoon trading, still close to six-month lows and more than 50% down from the €60/MWh high in October.
However, if the ban on new facilities is upheld, then analysts said the move would be bearish for the US natural gas market, which has ample excess supplies due to the shale boom, but potentially disastrous for Europe, which now has a major structural short in natural gas after cutting off Russian pipeline supplies.
