The United States of America (USA) has decided to temporarily suspend the approval process for liquefied natural gas (LNG) exports. It has been stated that this situation will not affect the US’s supplies to its allies in Europe and Asia and other currently permitted buyers. It is thought that the pressure of environmental groups was effective in making this decision.
The US Department of Energy announced that the Biden administration has temporarily suspended pending approvals for LNG exports to countries without a Free Trade Agreement until it updates its baseline analysis for permits for LNG exports. In the statement, it was stated that LNG will continue to be supplied to allies in the short term. The USA aims to double LNG exports in 10 years.[1]
Russia’s restriction of the gas supply it sends to Europe through pipelines has led to a dramatic increase in European gas and electricity prices in the second half of 2021. In addition, the Russia-Ukraine War, which has been ongoing since February 2022, has created serious difficulties for Europe. Europe has installed 36.5 billion cubic meters of LNG regasification capacity since the beginning of the war in Ukraine. An additional new or expanded LNG import capacity of 106 billion cubic meters is in the planning stage by 2030. This is expected to increase Europe’s LNG import capacity to 406 billion cubic meters.
Previously, the main destination for US LNG exports was Asia, but in the last two years two-thirds of cargoes have reached Europe. According to US Energy Information Administration (EIA) data, the amount of LNG sent by the USA to Europe in 2022 increased by 141 percent compared to the previous year. After pipeline gas from Russia dropped to its lowest level in the last 40 years, Europe’s share in the “US-LNG basket” increased to 64 percent. According to the predictions of international research organizations, the largest LNG exporting global player in 2023 is expected to be the USA. Ship tracking data compiled by “Energy Outlook Advisors” shows that global LNG demand has reached an all-time high with 2.8 percent annual growth in 2023.[2]
Even if this decision taken in the short term shows that it will not affect the USA’s 2028 LNG targets, it may pave the way for China to grow in parallel with increasing energy imports. When we look at the published data, China is not expected to take any steps against climate decisions. According to “Enerdata 2022” data, a total of 7.86 billion tons of coal was consumed in the world in 2021, and China ranked first with a consumption of 4.1 billion tons (52%). [3] In other words, it diversifies energy in favor of fossil fuels. Giving this example, even if restricting LNG exports does not shake the US’s LNG leadership in the short term, it may direct export countries to fossil fuels in the long term.
Diversification of energy sources is one of the main components of energy security. It can be expected that, as obligations under Free Trade Agreements are suspended, these countries will turn to Asian countries in their search for alternatives. On the other hand, experts’ comments are that this decision is political and was taken to please the green bloc.[4]
17 LNG projects are still awaiting approval in the USA. These projects, with a capacity of 90 million tons, had to suspend their final investment decisions after the decision. Among the reasons why it was declared that the decision taken was political, the fact that the investments of the domestic market were also shelved was effective. US Senator Michael Bennet expressed his opposition to President Joe Biden’s decision to halt approvals for new LNG export projects. Expressing his concerns on this issue, Bennet underlined the potential negative impact of the continent’s search for an alternative to Russian gas, especially amid the ongoing conflict in Ukraine, on the United States’ ability to support Europe’s energy needs.
Biden’s order at the end of January to halt new LNG export approvals, while consistent with climate goals, has sparked controversy among those who believe it could undermine efforts to aid Europe, especially during Russia’s war in Ukraine.
This decision, which stipulates that decisions on new LNG facilities will be postponed until after the November 5, 2024 elections, has been praised by climate advocates. However, this decision was not left without criticism in the Congress. The Republican-led US House of Representatives has passed a bill aimed at revoking the President’s authority to freeze LNG export approvals. While the bill passes mostly along party lines, it is expected to face significant challenges in the Senate, which is controlled by Democrats. Senator Bennet, who represents the state of Colorado, known for its natural gas production, described the President’s decision as “narrow minded” in an interview with Fox News Sunday. Despite his criticism, Bennet has not stated whether he would support legislation that would overturn the President’s decision.
In addition, it is known that natural gas prices in the domestic market have increased in parallel with the increase in LNG exports in the USA. The European market has been moving away from Russian oil and gas since the beginning of the war in Ukraine and increasingly towards US LNG as an alternative. Bennet emphasized the importance of American LNG in replacing Russian supplies to Europe and talked about the strategic power of the USA in both clean energy and fossil fuels. A European Commission official said in a statement that the President’s decision is not expected to affect US LNG supplies to Europe for the next two to three years. This statement shows that, despite the pause in new export approvals, European energy imports from the USA will continue as planned in the near future.[5]
[1] “ABD Yeni LNG İhracatına Dur Dedi Kaynak: ABD’den LNG İhracatına Çevre Molası”, Enerji Günlüğü, https://www.enerjigunlugu.net/abd-yeni-lng-ihracatina-dur-dedi-57497h.htm, (Date of Access: 30.01.2024).
[2] “ABD’nin LNG Onaylarını Durdurma Kararının Etkisinin Piyasaya Hemen Yansıması Beklenmiyor”, AA, https://www.aa.com.tr/tr/ekonomi/abdnin-lng-onaylarini-durdurma-kararinin-etkisinin-piyasaya-hemen-yansimasi-beklenmiyor/3121724, (Date of Access: 29.01.2024).
[3] “Kömür”, Enerji ve Tabii Kaynaklar Bakanlığı, https://t.ly/4C9E1, (Date of Access: 23.02.2024).
[4] “ABD, LNG İhracatında Onayları Geçici Olarak Durdurdu.”, TRT Haber, https://www.trthaber.com/haber/dunya/abd-lng-ihracatinda-onaylari-gecici-olarak-durdurdu-832352.html, (Date of Access: 27.01.2024).
[5] “ABD’li Senatör Biden’ın LNG İhracatını Duraklatmasını Eleştirdi.”, Investing, https://tr.investing.com/news/commodities-news/abdli-senator-bidenn-lng-hracatn-duraklatmasn-elestirdi-93CH-2704418, (Date of Access: 19.02.2024).
