Scepticism abounds as to whether US LNG exports projects will gain traction following President Trump’s executive order to resume approvals for LNG exports to non-FTA countries. Analysts see this move as a “reshuffling” of which pre-FID projects are most likely to be sanctioned – not as an actual change to the number of FIDs.
“US LNG projects compete in a global market, and each additional FID draws on additional, higher-cost supplies, eroding their economic competitiveness,” commented Rystad Energy’s senior vice president, Oil & Gas Research, Amber McCullagh.
To-date, American LNG projects largely rely on feedgas from the Haynesville shale, where the remaining Tier 1 inventory is limited and ownership of acreage is increasingly consolidated among the largest operators. Appalachia shale, in contrast, is home to the most untapped gas reserves – but moving these molecules to the coast for liquefaction and export is deemed “prohibitively expensive.”
“Trump is likely to push for permitting reforms, but such changes would require an act of Congress, which saw some bipartisan interest in the last session,” she noted, indicating the actual revision or withdrawal of former President Biden’s pause on approving non-FTA export licenses will be limited. Biden’s action halted momentum on several projects that had previously been close to taking final investment decision which sparked fierce criticism from the industry.
Outlook of gas-fired generation uncertain
Regardless of Trump’s rush to declare a ‘National Energy Emergency’ on his first day in office, analysts caution the President’s “drill, baby, drill” mantra overestimates the industry’s willingness to prioritize growth over investor returns in light of Tier 1 inventory depletion in core oil basins after 2030.
Speeding up permitting on federal land may incentivise some operators to produce more oil and gas, though volume growth is expected to be marginal and mostly used as feedgas for LNG export projects. Gas-fired power generation, on the other hand, may not benefit much as domestic gas prices are unlikely to recede sufficiently to make burning gas more competitive than unabated coal in some areas, let alone renewables.
“Trump signalled he would block new offshore wind leases, but these are unlikely to meaningfully impact the US generation mix,” McCullgah commented, adding: “Removing subsidies for wind and solar generation would have a more significant impact, but such a move would also require Congressional approval, and Republicans’ margins are very small in the House of Representatives.”
Nontheless, momentum in gas-fired generation is already in place, so rising domestic fossil fuel demand is likely – especially since utilities struggle to meet rising electricity demand from data centers and e-vehicles, and are hard pressed to provide sufficient dispatchable generation for balancing power.
