Any potential long-term LNG-permitting pause by the US would likely be “devastating” for many Asian countries, forcing them to continue their use of coal for power generation or increasing reliance on the Middle East and Russia, as the region strives to fulfill its energy needs and net zero goals, Asia Natural Gas & Energy Association, or ANGEA, CEO Paul Everingham told S&P Global Commodity Insights.
On Jan. 26, the US administration announced a review of LNG export approvals to non-free trade agreement countries and, while doing so, paused the LNG authorization process for those projects.
“It’s the last bit, which is unique. The US periodically conducts reviews but historically hasn’t paused the approval process,” Everingham said in an interview.
Several LNG projects — with a total capacity of about 37.5 million mt/year approved by the Federal Energy Regulatory Commission but awaiting Department of Energy licenses, and around 46.4 million mt/year awaiting both FERC approvals and DOE licenses — have been impacted by the decision, Everingham said.
Some of these projects are extremely “meaningful” for Asian markets such as Japan, South Korea and China, and if they do not proceed, over 40 million mt/year of LNG could be wiped out of the global market, he added.
Several supporters of the export pause may argue that there is still plenty of LNG being exported from the US and that it is essential to look at the impact of LNG exports on the environment, the domestic economy and local gas prices, Everingham said.
But US domestic gas prices have not been negatively impacted by the expansion of LNG, while the economic benefits to Americans from LNG exports have been huge without compromising on US energy security goals, he added.
The US also produces its gas under some of the most stringent environmental regulations, Everingham said.
“So, in terms of US LNG export potential, our research (done in conjunction with Rystad Energy) suggests that approximately 52% more than that is currently approved must be activated by 2040 to meet Asia’s demand during energy transition,” he added.
Additional gas from the US would not only help many Asian countries that are increasingly switching from coal to gas-fired power consumption but would also support industry electrification and help tackle issues associated with the intermittency of renewables, encouraging their use, Everingham said.
A recently published study by the Berkeley Research Group showed US LNG used in power generation in China, India, Japan, South Korea and Taiwan had far fewer lifecycle emissions than coal or pipeline gas sourced from Turkmenistan and Russia, he added.
Importantly, data centers and artificial intelligence will increase the demand for electricity consumption across Asia and potentially drive up natural gas demand, Everingham said.
It is therefore understandable if the industry holds concerns about restrictive conditions resulting from the review in the US because the market needs certainty, he added.
“Suppliers and buyers can’t predicate investment decisions during highly uncertain periods, especially [those] involving political variables,” Everingham said.
“We hope that there is sufficient transparency and urgency during the review process and hope for it to be completed within 12 months so that the pause is behind us in the very near future,” he added.
Sobering prices
Other recent external supply risks have not been that severe, Everingham said, noting that the Suez Canal geopolitical risks and the Panama Canal restrictions have impacted certain shipping routes and timelines for the delivery of some LNG cargoes but have not resulted in a shortage of volumes to Asia.
After Russia’s invasion of Ukraine, European buyer countries have built substantial gas storage, he added.
Toward 2025-26, planned new supply is scheduled to come online from the US and Qatar. Additionally, there will be new supply from Australia, Canada and Africa, Everingham said.
“We’re getting quite close to that timeline, and the increased supply will likely have some impact on prices,” he added.
More affluent advanced countries that are existing buyers of gas can usually sustain purchases at elevated prices, but gas needs to be affordable for emerging markets, Everingham said, noting that this will only happen with additional supply.
Global record coal use in 2022 and 2023 has shown the consequences of unaffordable gas and LNG for emerging nations, he added.
Periods of moderating prices are when countries should make the most of long-term contracts, Everingham said.
“We expect to see countries and companies take advantage of these moderating prices in the next few years,” he added.
Countries such as Vietnam and the Philippines may use the additional supply in the market over the next few years to ink longer-term deals, while India will likely look to utilize both long-term contracts and spot purchases, Everingham said.
Platts, part of S&P Global, assessed the June JKM at $/MMBtu on May 2, up 49.3 /MMBtu from April 30.
Source: Platts
