In late January, the Biden administration shocked the energy sector with its announcement that it was temporarily pausing any pending approvals of liquified natural gas exports to countries that do not have a current free trade agreement with the United States.
The move is ostensibly to allow the U.S. Department of Energy to “update the underlying analyses for these authorizations,” as the current authorizations were last updated in 2018 and “no longer adequately account for considerations like potential energy cost increases for American consumers and manufacturers … or the latest assessment of the impact of greenhouse gas emissions.”
Three weeks later, Shell released its global LNG outlook forecasting a nearly 50-percent growth in demand by 2040. Their analysis suggests that while natural gas demand in some regions has peaked, that global demand will continue to grow, peaking in the 2040s.
“China is likely to dominate LNG demand growth this decade as its industry seeks to cut carbon emissions by switching from coal to gas,” said Steve Hill, executive vice president for Shell Energy. “With China’s coal-based steel sector accounting for more emissions than the total emissions of the UK, Germany, and Turkey combined, gas has an essential role to play in tackling one of the world’s biggest sources of carbon emissions and local air pollution.”
The role of LNG in European energy security continues to be important, according to Shell’s analysis, with new regasification plants coming online and delivering additional supply, despite the fact that overall gas demand in Europe fell in 2023.
Shell’s outlook also points to the important role that natural gas plays in stabilizing electrical grids supplied with significant amounts of intermittent renewable energy.
Industry Reaction
The response from the business community to the president’s action was swift.
“This is a win for Russia and a loss for American allies, U.S. jobs and global climate progress,” said Mike Sommers, president and CEO of the American Petroleum Institute. “There is no review needed to understand the clear benefits of U.S. LNG for stabilizing global energy markets, supporting thousands of American jobs and reducing emissions around the world by transitioning countries towards cleaner fuels.”
“Over the past two decades, America’s energy landscape has completely transformed because of natural gas,” wrote Marty Durbin, president of the Global Energy Institute at the U.S. Chamber of Commerce. “As our nation unlocked shale reserves and dramatically increased natural gas production, we went from a posture of energy scarcity to energy abundance and opportunity. The development has allowed the United States to provide affordable, reliable, and cleaner energy both at home and to our allies abroad.”
Up on Capitol Hill, House Republicans joined by 9 Democrats passed H.R. 7176, the “Unlocking our Domestic LNG Potential Act,” to repeal the Biden administration’s restrictions.
Sen. Joe Manchin, D-W Va., chair of the Energy and Natural Resources Committee, said the move was “unjustified” and “should be reversed.” But Senate Democrats have no interest in taking up the House bill and little appetite to squabble with the president on this issue, though there’s a chance that the Senate could attach a provision to another bill.
What is the impact of Biden’s move?
David Braziel, CEO of RBN Energy, LLC, wrote in a Feb. 15 blog post that they expect this pause in permitting to affect current LNG projects in the Gulf of Mexico, one project in Mexico that was going to use imported natural gas from the Permian and Eagle Ford, as well as boost several Canada projects using non-U.S. natural gas, as well as other major LNG exporters, such as Qatar, Russia and Iran.
Braziel observes that these moves are obviously bad for LNG project developers but also for LNG consumers, including Germany and UK.
He noted that “natural gas production and consumption in the U.S. and elsewhere has, in almost every instance resulted in lower GHG emissions because gas replacing higher-emissions alternatives.”
And while U.S. LNG exports would reduce supply available to U.S. consumers, “RBN projects that U.S. E&Ps would be able to increase their gas production to meet the incremental demand.”
Suspected Motive
So where did this surprise White House action come from?
Writing in the Wall Street Journal on Feb. 9, Benoît Morenne and Andrew Restuccia reported that President Biden’s decision followed an orchestrated effort by environmental organizations who enjoy the financial backing of the Rockefeller Foundation, Michael Bloomberg and other benefactors and are committed to eradicating fossil fuel use.
A skeptical Sen. Manchin suggested the move was political. In his opening statement to a Senate hearing that he had called to solicit testimony on the pause, he said, “Unfortunately, it seems the White House has already sided with climate activists determined to block any more LNG exports, and I am deeply concerned the White House will put its thumb on the scale at DOE to get the political outcome they want.”
At the hearing Deputy Energy Secretary David Turk did not provide specific guidance to Manchin and his colleagues on the timing for removing the pause, but did suggest it would take “months, not years.”
To which, according to Axios, Alaska Sen. Lisa Murkowski wryly observed, “My guess, and I think it’s probably a pretty well-educated guess, (is) that it will conveniently not be concluded prior to the election.”
While natural gas demand in some regions has peaked, that global demand will continue to grow, peaking in the 2040s.