Who are the unintended winners from Biden’s US LNG ban?
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
President Joe Biden’s decision to suspend authorisations for new liquefied natural gas export plants has provoked a predictably virulent debate, not least about its environmental impact. Supporters of a ban point to emissions from burning gas and leakage along the value chain, while opponents fear that less LNG supply would mean more coal use.
But quite apart from the climate debate, if the suspension became long-lasting or permanent — a big if, especially given the upcoming presidential election — it would certainly have unintended consequences.
Firstly, consider the potential impact on the gas industry. At worst, the halt might affect projects with up to 100mn tonnes per annum of LNG capacity, says Wood Mackenzie. That’s about the same as the operating LNG capacity today.
That’s bad news for those hoping to develop these plants. Companies that have secured US regulatory approval — including Venture Global and Golden Pass, a joint venture between Exxon and QatarEnergy — and gas traders that have bought gas from projects already under construction, might well be pleased to see the door slam behind them.
Yet the industry is eyeing the suspension nervously. Shell’s boss Wael Sawan worries that the suspensions tarnish the role of LNG as a widely available fuel, tempering its demand overall.
A permanent suspension of new LNG licenses would raise global LNG prices, further polarising the world into those who benefit from cheap gas and those who do not.
This would not happen immediately. About 90mn tonnes of US projects have already been authorised, meaning there is no escaping a near-term LNG glut. But, absent further US supply growth, global LNG prices would probably start to rise towards the end of the decade.
That would not please importing countries, including those in Europe. Conversely, US industry — including steel and chemicals — might benefit from the added availability of even cheaper natural gas. New export projects potentially caught by the suspension would have absorbed up to a tenth of current US upstream gas production.
Ultimately, a lasting suspension could benefit alternative LNG suppliers. One of these is Russia. As the Oxford Institute of Energy Studies points out, it has projects that could be developed reasonably quickly, including Novatek’s Murmansk.
Despite sanctions preventing use of specialised technology, Russia has started up its Arctic 2 project, which was itself sanctioned late last year. Other new projects could also be hit with restrictions on a case-by-case basis. But there is a clear risk that scantier US supplies succeed in increasing global demand for Russian gas.
This article has been corrected to make clear that Venture Global and Golden Pass have secured US regulatory approval for their LNG plants
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