Industry figures have been speaking before the US Senate Committee on Energy and Natural Resources
Industry figures have been speaking before the US Senate Committee on Energy and Natural Resources

Economic engine and strategic asset: LNG makes defence case at Senate hearing

Perceptions around the US LNG export approval pause are more damaging than the impact on the gas market today, as it makes the US look “unstable” as an ally or even non-committal to supporting Europe, according to a leading industry figure.

That was the concluding view of James Watson, Secretary General at Eurogas, speaking before the US Senate Committee on Energy and Natural Resources, who together with Charlie Riedl, Executive Director of the Center for LNG, set out a powerful case for lifting the approval pause.

“Eurogas believes strongly that the US and Europe should work together to deliver the missing volumes of gas that Europe will need to be independent of Russian natural gas imports,” said Watson.

“Failing to have enough US LNG in the market in 2026, 2027 and 2028 could result in increasing risk and prolonging the global supply imbalance. It is therefore important that the Department of Energy reconsiders the pause, as soon as possible, to ensure that we do not end up short of supply at a time when we need to have independence from Russian energy imports.”

Earlier Watson said there is a high risk of a supply gap in Europe, and while it has so far been avoided this year, thanks to preventive measures and mild weather, the equilibrium remains fragile. “This equilibrium will be further challenged due to the growth in other regions of the world’s LNG demand,” he said.

The US is one of only two potential sources for providing the volumes of LNG that Europe needs to become independent from Russian gas as soon as possible, the other possibility is Qatar, he added.

In the US the pause in licensing affects around 50 bcm of projects that are awaiting a green light from the Department of Energy to start construction.

“We are aware that not all the capacity that is being built will be destined for Europe, clearly US market actors have contracts with customers in Asia and Latin America,” said Watson. “However, if that capacity does not come online in the next two-to-three years, then there is likely to be a shortfall of LNG in Europe and possibly globally… It is important that the LNG trade between the US and Europe remains stable, reliable and honest.”

Riedl stressed LNG is not just a commodity but a strategic asset and pivotal for reducing emissions, creating jobs, ensuring economic stability and strengthening US’ diplomatic ties.

“This is especially true with allies in Europe and Asia,” he said. “At a time when energy security and climate change are critical global issues, the significance of US LNG cannot be overstated.”

He added that the pause is inconsistent with the US’ free-market principles, before setting out the environmental and climate rationale for LNG, saying using natural gas for electricity generation emits approximately 50 to 60% less CO2 than coal.

“LNG is a key component for accomplishing two of the US’ most important objectives: improving energy security and bolstering environmentally responsible and sustainable practices,” he said.

Last year, Henry Hub (domestic) natural gas prices were the lowest since mid-2020, even as LNG and natural gas pipeline exports grew.

“Restrictions on LNG exports could lead to fewer consumer choices and potentially higher domestic prices due to less production at home,” said Riedl, adding that continual growth of LNG exports is essential in stabilising the domestic natural gas market.

Turning to the economic impact, he said the construction of an LNG export facility costs “tens of billions of dollars” in labour and materials, and during peak construction periods, companies employ between 2,000 and 3,000 workers. He stressed that capital-intensive LNG export facilities rely on regulatory certainty.

And on the key issue of economic security, he said US LNG helped support European countries with more than 2trn cubic feet of natural gas in the first nine months of 2023.

The US has committed to significantly increase its LNG exports to the EU by an additional 50 billion cubic meters per annum by 2030.

Concluding, he said halting US export approvals undermines the US’ leadership in global energy markets, suggesting it is no longer a reliable energy supplier, and neutralise its influence on international energy policies. In addition, a pause will put its economy at risk.

DOE and Senator testimonies

In his opening remarks, Senator Joe Manchin, Chairman, Senate Committee on Energy and Natural Resources, said over the past seven years, its LNG production has ramped up from essentially no exports in 2016 to a peak capacity of around 14 billion cubic feet (bcf) per day today, which is about 14% of current US production capacity and more than any other exporting nation.

He said to support these increased exports, the US is producing more energy than ever in our country – 4.7  billion barrels of crude oil and 37 trillion cubic feet of gas in 2023. And during that time, our domestic natural gas prices have remained flat on average.

“But at the same time as we’re producing and exporting more than ever, American consumers are also using a record amount of gas – now more than 32 trillion cubic feet annually.

“So let me be clear – a lot has changed in a few years and there are sensible reasons to update the market assessments that DOE uses when reviewing export applications to ensure the trajectory we’re on won’t risk harming American families and businesses.”

Manchin said the administration hasn’t “actually done its new market assessment yet or presented us any facts that justify this pause at all”.

“They do throw around some data points – for example they tout that the US is on track to export 26 billion cubic feet per day by the end of this decade, between facilities currently operating and those now under construction. But my question is this: where is the analysis showing that 26 is the magic number?

“Facts must come before action, not the other way round.”

David Turk, Deputy Secretary of the US Department of Energy (DOE), highlighted three key elements that need to be analysed during the export pause.

“First, the amount of US natural gas that is being exported has dramatically increased, and we need to answer how authorising exports beyond these unprecedented volumes could impact affordability for US consumers and competitiveness of US manufacturing,” he said.

“Second, our understanding of CO2 and methane’s effect on climate change have only become sharper, and we need to further improve our analytical tools to answer a range of questions about LNG exports’ climate and environmental consequences, both near and longer term.

“Third, increased deployment of clean energy is driving updated estimates of fossil fuel demand and usage over time; and we need to understand how the latest regional and global trends will impact our own energy security as well as that of our allies.”

He stressed it is not an unprecedented step. “In fact, DOE has repeatedly updated our analyses to enable the Department to carry out our statutory responsibility to determine whether authorizations are in the public interest, including a time in the past when we also paused reviews while we updated our analysis.”

Senator John Barrasso (R-WY), ranking member of the Senate Committee on Energy and Natural Resources (ENR), said the world needs – and wants – “more American energy, not less”.

“There is no basis to the claim that American natural gas exports are bad for the environment,” he said. “The fact is, American natural gas is among the cleanest in the world – far cleaner than Russia, far cleaner than Iranian gas.”

In the eight years since it began exporting LNG, the domestic spot price of gas is, on average, much lower than the domestic spot price on gas during the 8 years before we were able to start exporting LNG, he added.

“Critics also say exports would reduce the supply of natural gas here at home. But, in 2023, there was 23% more natural gas available to the U.S. economy than in 2015 – the year where we began with exports. That’s because American natural gas exports stimulate additional natural gas production.”

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