Trump advocates for rescinding Biden's restriction on certain natural gas exports. This move may not significantly benefit America's primary purchaser.
Trump advocates for rescinding Biden's restriction on certain natural gas exports. This move may not significantly benefit America's primary purchaser.
The move is unlikely to significantly address climate change concerns and might even worsen the issue. As for the leading buyer of American LNG, which is heavily reliant on natural gas imports, they won't reap the benefits until the end of the decade.
The Old World has been looking forward to increased flows starting in January. After enduring high energy prices for almost three years, they're on the verge of losing one of their final sources of Russian pipeline gas.
The global gas market is still tense as we approach winter, not calmed by predicted mild winters. The market remains vulnerable due to low European gas inventories, the unreliability of weather forecasts, doubts about Russian gas supplies, and project start-up delays for new LNG projects.
American LNG exports have skyrocketed in less than a decade. From selling minimal amounts abroad, the U.S. rose to outpace Australia and Qatar, becoming the world's foremost LNG exporter, according to the Energy Information Administration (EIA).
In January, Biden's administration halted authorizations for several pending LNG export projects to evaluate their environmental impact and domestic energy security and costs. However, this halt does not apply to previously approved exports.
The Department of Energy recently released its assessment, projecting that additional LNG exports beyond current authorizations would result in an additional 1.5 gigatons of greenhouse gas emissions per year by 2050, equivalent to a quarter of current U.S. annual greenhouse gas emissions.
The final decision on LNG exports lies with the next administration, Energy Sec. Jennifer Granholm stated to the press.
Studies suggest that LNG generates less greenhouse gas pollution over its lifetime than other fossil fuels, but its climate impact is contingent on whether it replaces oil and coal or renewable energy sources. Other research shows high methane leakage rates at various stages of LNG production. Methane is a potent greenhouse gas, with 80 times more warming power than carbon dioxide over short timeframes.
Trump's allies plan to lift the LNG moratorium once he takes office in January, as per sources familiar with discussions among incoming advisors and potential national security appointments.
In regard to Europe's situation:
Europe's energy makeover
Before Russia's 2022 full-scale invasion of Ukraine, it was the EU's leading provider of natural gas. Since then, the EU reduced Moscow's share of imports to 15% in 2023 from 45% in 2021, by decreasing pipeline deliveries.
The EU has imported massive amounts of LNG from the U.S. and other countries, as well as pipeline gas from Norway, to fill the gap. Now, according to the EIA, Europe is the primary recipient of USLNG exports, absorbing two-thirds of the shipments last year.
The EU has also increased its Russian LNG imports to heat homes and power factories. However, it has set a 2027 deadline to phase out all fossil fuel imports from Russia, creating more opportunities for the U.S. to serve as Europe's energy provider.
That independence day is still years away. On January 1, 2025, a contract allowing the transit of Russian pipeline gas through Ukraine is scheduled to expire. These flows account for 5% of the EU's total gas imports, primarily supplying Austria, Hungary, and Slovakia.
These countries won't face an energy shortage, experts say, indicating they'd likely compensate by importing more LNG or more natural gas via pipeline from other EU nations.
However, the expiration of the contract will make it challenging for Europe to replenish its reserves before the next winter, according to Wood Mackenzie senior natural gas researcher Massimo Di Odoardo.
The global LNG supply is anticipated to rise modestly in 2025, but Europe will likely struggle to pump up storage levels to comfortable levels by the end of the summer. Natural gas prices in Europe have dropped from record highs reached in summer 2022 but remain more than double their historical levels. The expiration of the transit deal is one reason prices are not likely to decline significantly in 2024, analysts told CNN. Di Odoardo expects prices to remain steady or possibly rise if the contract is not renewed.
The outlook should improve for Europe in the second half of the decade, as a surge in new LNG supply from the U.S., Qatar, and other producers is projected to hit the global market. By the end of the decade, LNG trading in the world market could be 50% higher than currently, excluding potential supply from pending U.S. projects, Di Odoardo predicts.
Additional exports due to the lifting of Biden's ban would not enter the market until after 2030. When they do, they will help drive broader price reductions for European natural gas.
This month, analysts at Capital Economics mentioned in a note that they predict European prices to roughly split in half from their current levels by the year 2026's end. Nevertheless, prices might not regain their pre-crisis levels in Europe, as per Francisco Blanch, the head of commodities and derivatives research at Bank of America. The price surge of natural gas occurred following Russia's invasion and the rise in global energy demand as economies reopened post-Covid lockdowns.
Blanch explained to CNN that as long as Europe continues to import LNG over vast distances, such as crossing the Atlantic Ocean, instead of sourcing it from closer neighbors, it will have to bear the costs of transportation and other logistics.
This situation places European businesses at a disadvantage compared to ones in the US, which typically pay less for their energy. Currently, European natural gas prices are up to five times more expensive than those in the US, according to analysts at Capital Economics, who anticipate the difference to diminish by the end of 2026, resulting in prices around three times higher.
In a noteworthy report published in September, Mario Draghi, the previous head of the European Central Bank, pointed out that the volatility in European energy prices has a considerable impact, hampering energy-intensive industries and the economy in its entirety.
Blanch from Bank of America also made an intriguing observation.
"(Companies) are relocating their operations away (from Europe)," he said. "If you have a heavy or chemical industry — which is a high-energy-intensity industry — you’re moving to the US Gulf Coast. You're heading to the source of the energy."
Laura Paddison provided the reporting.
The business of exporting LNG from the U.S. has significantly increased in the past decade, positioning the country as the world's foremost LNG exporter.However, additional LNG exports beyond current authorizations could result in an additional 1.5 gigatons of greenhouse gas emissions per year by 2050, according to the Department of Energy's assessment.