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How Do You Like Me Now? - Who Are the Winners and Losers With Biden's LNG Permitting Pause?

The Biden administration’s recently announced decision to pause further action on new LNG export permits for at least several months sent shockwaves through the industry and shook up expectations regarding which projects will be hurt by — or benefit from — the pause. As we’ll discuss in today’s RBN blog, the decision is likely to put a number of Gulf Coast LNG export projects (one of them a real giant) in limbo, set back a Mexican project that would depend on Permian and Eagle Ford gas, and boost a couple of projects up in Canada. Oh, and there’s this: The pause also may help two avowed enemies of the U.S.: Russia and Iran. 

We should begin by emphasizing that getting an LNG export project sanctioned, financed and built is no easy feat. These projects are capital-intensive, typically costing many billions of dollars each, and almost always depend on commitments from large, creditworthy offtakers to purchase mammoth volumes of LNG over a period of 15 or, more often, 20 years. Like highly competitive applicants for a top-tier corporate job, developers of LNG export projects need to convince potential offtakers and investors that their planned facilities best meet the criteria that everyone’s looking for, including feedgas availability, pipeline connectivity, counterparty risk and technologies. The competition among projects has been — and remains — fierce.

One essential factor that developers of LNG export projects had long taken for granted was their ability to eventually secure federal permits to export U.S. natural gas. As we said recently in Take Five, every U.S., Mexican or Canadian project that plans to export U.S.-sourced gas as LNG requires export licenses from the Department of Energy (DOE). The licenses come in two flavors, one for sales to Free Trade Agreement (FTA) countries and one for non-Free Trade Agreement (non-FTA) countries, and typically allow for exports to continue through 2050. Projects need both licenses to export competitively — they are usually granted in that order (FTA first, then non-FTA) — and both typically come after a project has already received its Federal Energy Regulatory Commission (FERC) authorization. (Figure 1 shows the FTA and non-FTA countries that imported U.S. LNG in 2023 — light-blue- and gold-shaded countries, respectively.)

FTA and Non-FTA Countries That Bought U.S. LNG in 2023

Figure 1. FTA and Non-FTA Countries That Bought U.S. LNG in 2023. Source: RBN’s LNG Voyager

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