US poses regulatory risk to LNG exports

The Biden administration last week paused the issuance of new non-FTA export permits, representing a significant regulatory risk for planned US LNG export projects without DOE authorisation. The list of proposed projects jeopardised by the policy includes: VG’s Calcasieu Pass 2 & Delta LNG; Energy Transfer’s Lake Charles; Sempra’s Port Arthur phase 2; Commonwealth LNG; Cheniere expansions at Corpus Christi & Sabine Pass; and Mexico Pacific’s Saguario Energia LNG (requires permit to export US-sourced LNG to non-FTA countries).

Of these projects, only ~20 mtpa had been included in the Timera Central case fundamental outlook (e.g. by virtue of firm levels of binding and non-binding contract cover), mitigating the potential impact of the announcement, against the backdrop of ~250 mtpa of incremental global supply (98 mtpa of permitted US supply) due online between now and 2030 in our Central case (see the Timera Global Gas Service for more details).

Lastly, it’s important to highlight (i) the politically sensitive nature of this policy and hence the potential for its swift reversal at the end of a US election year (ii) the fact that this is not a ban on future approvals, but a pause pending a review on the environmental impact, which may ultimately fall in favour of the projects at risk.