The US pause on granting new LNG export licences will likely end after the presidential election in November but an expected ramp up in global production may lag demand post 2029, said consultancy Wood Mackenzie.
Up to 60m tonnes/year (82bcm/year) of global capacity was “facing fresh challenges” amid ongoing legal uncertainty in the US, sanctions on Russia’s LNG sector and setbacks in Mozambique, it added in a note.
“We expect the pause will be lifted after the November [US] presidential election but how quickly a new framework for approval will be developed and how it will evolve is unclear,” it said.
US uncertainty
Highlighting ongoing legal uncertainty in the US, Wood Mackenzie cited a court decision last month that cancelled regulatory authorisation for NextDecade Corp’s Rio Grande LNG facility in Texas that aimed to export 37bcm/year of LNG.
Meanwhile, the consultancy also said the launch of Russia’s Arctic LNG 2 facility was being hampered by US and European sanctions, while project development in Mozambique was beset by political and security concerns.
“Supply growth from Qatar and Abu Dhabi will help paste over the cracks but the timing of the next wave of supply looks less certain than 12 months ago.”
In addition, the firm warned a tighter than expected LNG market could dent the appetite of price-sensitive Asian buyers and slow their shift away from coal.
“If supply growth is less pronounced than previously anticipated, then buyer confidence could prove fragile in the much awaited rebalancing of the global LNG market – when softer prices should help crystalise Asian demand – from around 2026.”
EU tax?
Another longer term headwind, was the growing scrutiny of the LNG industry’s carbon footprint, which could eventually result in the EU implementing a tax on emissions from such imports, said Wood Mackenzie.
The Biden administration in January imposed a temporary freeze on approval of LNG export licences to countries without a free trade agreement, while it reviewed economic and environmental impact of proposed LNG plants. The pause was overturned by a court in July, and the ruling was then appealed by the government.
Montel reported last week, however, that both candidates – Republican Donald Trump and Democrat Kamala Harris – in the US presidential race would likely try to resume LNG export project approvals.
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