US LNG Producers Express Confidence in Expansion Despite Regulatory Challenges

US gas producers maintain confidence despite the Biden administration's temporary suspension of key LNG export permits for new projects. Producers are gearing up to address incremental demand growth from projects already in progress, minimizing the potential impact of the permit halt. While proposed export terminals seeking offtakers may face challenges, major existing LNG export projects and those currently under construction are expected to proceed unaffected.

The Biden administration's decision, announced on January 26, to pause permits issued by the US Department of Energy (DOE) affects projects exporting LNG to countries without free-trade agreements with the US. The freeze is part of a broader reassessment of the environmental, economic, and national security impacts of LNG exports. The duration of this permitting suspension remains uncertain, with speculations suggesting it could last until after the November presidential election.

Jeremy Knop, CFO of EQT, expressed confidence during the company's earnings call, stating that the impact is not expected until at least the end of 2026. Current market assessments align with this view, anticipating no significant changes in the LNG build-out timeline. LNG feedgas demand is forecasted to surge to nearly 25 Bcf/d by 2028, driven by projects already authorized by the DOE and expected to commence operations in the near future.

The Golden Pass LNG facility in Texas and Venture Global's Plaquemines LNG in Louisiana, with capacities of 18.1 million mt/y and 20 million mt/y respectively, are poised to begin commissioning work in 2024. These projects, along with others, provide a substantial demand launchpad, fuelling optimism among upstream players.

Benchmark natural gas futures, priced below $2/MMBtu through June, prompt operators to adopt conservative guidance for the year until new incremental feedgas becomes available. Antero, for instance, plans to maintain total production flat in 2024, awaiting the startup of new export projects. The company remains bullish on the next few years, given that a significant portion of its gas production targets Gulf Coast markets where premium trading locations offer favorable pricing.

While the permitting freeze raises questions about the US's role as an LNG exporter, its immediate impact is on proposed projects. The lack of final investment decisions on new LNG projects in the US and Mexico, where DOE approvals are essential, is expected due to the freeze. Approximately 30 million mt/year of probable export capacity additions in the US and Mexico face uncertainty.

Some US gas producers with long-term LNG export deals find their projects affected by the freeze. EQT, with preliminary agreements for 2.5 million mt/year of LNG export capacity across three proposed terminals, faces challenges with Commonwealth LNG and Lake Charles LNG, both in Louisiana. Chesapeake, tied to the Delfin LNG project offshore Louisiana, confronts uncertainty as the project's non-FTA license has a June expiry deadline.