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Drewry Maritime Advisors
Maritime Research

Can paused US LNG projects hit Play again?

27 Feb 2024Print

The United States is reconsidering its decision to export liquefied natural gas (LNG) to non-free trade agreement (FTA) countries, causing uncertainty in the future of US LNG exports. The Biden administration has temporarily halted approval for new LNG projects, drawing support from environmentalists but raising concerns among LNG suppliers. Approximately 160 million metric tons per annum (mtpa) of planned projects are awaiting a final investment decision (FID) in 2024 and 2025, with some requiring approval from the Federal Energy Regulatory Commission (FERC).

Ongoing construction projects remain unaffected, but there may be challenges for projects starting after 2028 due to potential regulatory changes. Around 120 mtpa of LNG capacity is expected to come online between 2029 and 2032, potentially facing difficulties in adapting to new regulations.

 

Drewry’s outlook for US LNG remains stable until 2027-28, despite the recent announcement by the Biden administration to temporarily halt LNG exports. The good news is that most of the projects aiming to kick off by 2028 are already in progress. Moreover, the opposition from the US House could potentially prevent the Biden administration from introducing new rules for LNG exports, providing relief for the planned projects.

 

However, the US government’s decision to put a pause on LNG projects is receiving criticism from various parties, including local developers and buyers in Europe and Japan. This move has sparked concerns and differing opinions within the industry.

Drewry US LNG liquefaction capacity projection pre and post-announcement

Drewry US LNG liquefaction capacity projection pre and post-announcement

Note: Forecast considers operational, under-construction and planned capacity.

Source: Drewry Maritime Research

 

In the coming years, Drewry anticipates that US LNG production will reach 211 mtpa by 2028, showcasing a Compound Annual Growth Rate (CAGR) of 18% from 2023 to 2028. The forecast rests on the assumption that the temporary pause on LNG projects won't markedly affect those scheduled to commence operations between 2024 and 2028. As a result, the overall outlook is optimistic for the next few years in terms of US LNG production.

 

If the pause on LNG exports becomes a reality, it's unlikely to significantly impact projects scheduled to kick off by 2027-28. Those eyeing an FID in 2024-25, with progress in securing contracts and necessary approvals from FERC and Department of Energy (DOE), are likely to move into the construction phase in the following years.

 

Drewry has pinpointed some planned projects that could proceed despite regulatory changes. They are:

On the flip side, the Biden administration's pause on non-FTA export permits could significantly impact some planned LNG projects, putting about 80 mtpa of capacity on hold.

Despite this, the US is poised to nearly double its liquefaction capacity by 2028, adding about 80 mtpa of under-construction capacity. While the pause won't immediately affect European LNG supplies, it could impact long-term plans as Europe secures LNG from the US. For major Asian buyers like Japan and South Korea, already shifting towards nuclear energy, the impact is likely limited.

 

Contracted buyers in the US may not be heavily affected, but major commodity traders such as ExxonMobil, Shell, Venture Global, NextDecade, and Cheniere Energy might face challenges in reselling opportunities due to alterations in the LNG regime.

 

The pause on US LNG exports or the introduction of stricter regulations could potentially benefit other exporting countries like Canada, Mexico, and Australia. The uncertainty in US regulations might prompt LNG buyers to explore alternative sources.

 

Read more insights in LNG Forecaster.

Key Contacts

Aman Sud

Aman Sud

Senior Lead Analyst, Drewry Maritime Research

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