The latest US decision to pause the export of liquified natural gas (LNG) to countries that do not have a Free Trade Agreement (FTA) could tighten the market in the long term, global energy consultancy firm Wood Mackenzie said in a recent report.
US President Joe Biden announced the administration’s decision on Jan. 26 to temporarily pause all pending approvals of LNG exports amid climate change concerns over the amount of methane leaking along the LNG value chain.
Biden said his administration would study the impacts of LNG exports on energy costs, the country’s energy security and the environment during this pause.
According to Wood Mackenzie, the pause could impact Mexican LNG projects that plan to use US feedgas, and 10 projects awaiting non-FTA approval.
Almost 90 million tonnes per annum (mtpa) of projects awaiting non-FTA approval are expected to struggle to gain sufficient backing to proceed, the report said.
“The decision will not affect our forecast for US LNG exports out to 2028, but after that, it could affect the trajectory and pace of the sector’s growth and have the potential to tighten the market in the long run,’ Giles Farrer, head of gas and LNG asset research at Wood Mackenzie, was quoted as saying in the statement.
The report also forecasts that to meet growing global demand, US LNG and Mexican LNG project export capacity will reach 238 million mtpa of LNG by 2050, accounting for 30% of global LNG supply.
“With 200 million mtpa of LNG currently under construction around the world, which will add nearly 50% growth to the market, we have long held a view that there will be a slowdown in new investment decisions from 2024 because the global LNG market looks well supplied in the second half of the decade,” Farrer said.
“If the pause is temporary and simply delays FID to 2025 and 2026, the impact on the global market would not be material and perhaps only limited to the 2028–2029 period,” he added.
However, Farrer noted that a long-term pause on all new US LNG projects would have lasting implications for the global LNG market and could affect how buyers perceive US LNG.
“Both a short- and long-term pause may result in higher prices for the broader LNG market,” Farrer said.
“It could also have long-term implications for the role that gas and LNG play in the energy transition, with Asian governments potentially scaling back strategies to use gas as a transitional fuel to replace more polluting coal as they simultaneously ramp up investments in renewables, if possible,” he added.
