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July 18, 2024
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Silver Linings in Biden’s LNG Policy


Emily McClain is a vice president on Rystad Energy’s Gas Markets team, responsible for providing natural gas expertise focused on the North Americas gas market.


The Biden administration’s announcement to impose a temporary halt on U.S. LNG projects stunned both domestic and global markets, especially as shipments of the fuel have begun playing an oversized role in feeding demand in Europe and elsewhere.

With Russian supplies completely turned off, the West had banked on growing U.S. volumes to plug in the gap and keep prices in check during times of extreme weather or a potential revival in industrial consumption. But that surety of supply from a reliable partner hangs in balance now.

The directive to the Department of Energy to reevaluate the climate impact of these ventures has thrown into disarray potentially 100 million tonnes of projects in North America.

Still, though perhaps unintended, the move comes with some silver linings—it may help alleviate part of the massive oversupply expected in the second half of the next decade as these projects come online. In the near term, the pause on new non-FTA approvals could lift some pressure of an already strained supply chain, lower both equipment and labor expenses and ease some of the cost inflation they face now.

Emily McClain
Emily McClain is a vice president on Rystad Energy’s Gas Markets team. (Source: Rystad Energy)

While the recent pause will only affect projects that have yet to receive non-FTA authorization, it has caused uncertainty in the LNG project development scene. Short-term impacts could include delays in projects nearing final investment decision (FID), worsening existing challenges in project timelines and investor confidence.

Based on the current global gas market balance and LNG expansion plans, there are indications of a potential oversupply if all global LNG projects in the pipeline proceed as planned. While this could impact LNG demand in the 2030s, the immediate impact on the gas market is minimal, given that CP2 on the Louisiana coast and similar projects are not expected to come online for several years.

Opportunities and challenges

The demand for additional LNG supply from 2030 onward presents both opportunities and challenges. The U.S. could play a pivotal role in meeting this demand, but uncertainties surrounding project approvals and regulatory changes would cast doubt on its ability to step up.

Other LNG markets like the UAE, Qatar, Mozambique and Tanzania may need to fill the gap if the U.S. fails to capitalize on this demand. Ultimately, the trajectory of LNG projects in the U.S. will shape the future landscape of global energy markets, with far-reaching implications for energy security and sustainability.

With the U.S. on a net-zero pathway, future domestic demand growth seems unlikely, posing risks to demand for LNG feedgas. The potential loss of access to LNG feedgas demand could have dire consequences for domestic gas prices, as seen in Australia, where operators have ceased investments, leading to price volatility.

Additionally, this recent move raises concerns about the country’s reputation as a reliable LNG supplier and the impact on future LNG investments. Since 2016, the U.S. has provided policy certainty, speed of execution, and commercial and technical innovation, all of which help to keep commodity prices in check. However, the recent shake-up has created uncertainty for investors and the global gas market.

The administration’s decision has induced nervousness among future LNG customers, including allies in Europe and Asia. This could lead to a scramble for alternative suppliers for new long-term contracts. This reliance on uncontracted volumes subject to the spot market could disrupt Europe’s energy security and climate initiatives, as competition for alternative suppliers may drive up prices and shift consumption toward less environmentally friendly sources like coal (as happened in 2022).

Similarly, Asia, with the largest potential for LNG demand growth, could be forced to seek alternative sources, potentially compromising its energy security and climate goals.

Given the politics now associated with LNG approvals, resolution may be delayed until after this year’s elections. There is speculation about the duration of the pause and its potential reversal if Donald Trump is elected. Rystad Energy anticipates future LNG approvals to resume in 2025, even if President Biden secures a second term. Still, the delay in LNG approvals could impact projects scheduled for FID in 2024.

Is there a silver lining? Even with all of these uncertainties, there are potential positive outcomes that are worth considering. First, this pause could help alleviate looming oversupply conditions in the mid-2030s, leading to smoother market dynamics in the medium term. Another benefit that could occur is the prospect of a greener future for U.S. LNG as the DOE reassesses these projects.

This pause may promote and secure the future of Green LNG, positioning the U.S. as a leader in clean energy sources. There may be potential for increased opportunity to provide a clean transitional fuel to meet growing energy demand, particularly in southeast Asian countries where power demand is set to increase.



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