Wednesday, May 22, 2024

Biden’s LNG License Freeze: Impacts on U.S. Exporters and the Global Market


Biden LNG Freeze Delaying Projects and Risking USA Market Share

The Biden administration’s decision to pause new licenses for liquefied natural gas (LNG) exporters is casting a shadow over several projects that were targeting to become operational later this decade. This move has prompted a number of LNG buyers to hold off on signing new long-term agreements with U.S. producers, awaiting a clearer picture on the situation.

Notably, talks between Malaysian state oil and gas company Petroliam Nasional Bhd. (Petronas) and major U.S. firms such as Cheniere Energy Inc. have seen reluctance from the buyer’s side to commit until licenses receive the green light. This sentiment resonates among other key players in the industry, with Japan’s Jera Co. and at least two Chinese firms expressing similar hesitations about moving forward with negotiations amid the uncertainty.

As the world’s largest exporter of this critical power-station and heating fuel last year, the U.S. halted the approval of new licenses in January. The aim is to conduct a thorough examination of the potential impacts of increased gas production and exports on various fronts, including climate change, the economy, and national security. According to a Department of Energy official, this review process could span several months, posing challenges for American producers who rely on securing deals to obtain necessary financing from banks.

Projects like Venture Global LNG Inc.’s CP2 in Louisiana, which is pending required approvals, face the risk of delaying their final investment decisions. Such a delay hinders the commencement of substantial construction efforts. “First LNG is expected in 2026, should the Federal government act without further delay to approve the project,” stressed Shaylyn Hynes, a spokesperson for Venture Global, echoing the company‚Äôs ambitions amid the uncertainties.

Similarly, Sempra has postponed its investment decision on its Cameron facility in Louisiana, and Commonwealth LNG has pushed back the construction of an export terminal in the state. “The longer the pause lasts, the more problematic it is,” remarked Paul Varello, Commonwealth’s chairman and founder. He highlighted the challenges in securing contractor prices and maintaining delivery date commitments to buyers amid these delays.

The inability of U.S. exporters to secure the necessary debt financing from banks without clearances from the Department of Energy adds another layer of complication. Consequently, multi-billion dollar projects, desperate to tap into the booming global demand, find themselves at risk. This predicament becomes even more pressing as other developments, especially those in Qatar and the United Arab Emirates, proceed swiftly and threaten to capture market share that could have belonged to the U.S.

In a telling sign of the current market dynamics, the first quarter of the year saw a stark contrast in deal activities compared to the previous year. While the same period last year witnessed the signings of nearly 8 million tons per year from projects in the U.S. or Mexico, the current quarter has been notably quiet. The only exception comes from Delfin LNG, which managed to secure a modest agreement, thanks to having all necessary licenses in place.

As the situation unfolds, the LNG industry and market watchers alike are keenly awaiting the outcome of the U.S. government’s review. The decisions made in the coming months could have far-reaching implications for the country’s position in the global LNG marketplace.

Alexandra Bennett
Alexandra Bennett
Alexandra Bennett is a seasoned business journalist with over a decade of experience covering the global economy, finance, and corporate strategies. With a Bachelor's degree in Economics and a Master's in Business Journalism from Columbia University, Alexandra has built a reputation for her insightful analysis and ability to break down complex economic trends into understandable narratives. Prior to joining our team, she worked for major financial publications in New York and London. Alexandra specializes in mergers and acquisitions, market trends, and economic

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