Biden’s Proposed LNG Reform Unlikely to Affect Market in Next Years

The Biden administration is set to unveil plans within days for intensifying environmental scrutiny of applications to LNG export facilities, which is unlikely to affect US and global gas balances in the next 3-4 years, Goldman Sachs said in a note.

• The new regulation could be announced by the end of this week according to Bloomberg.
• Golman Sachs said the proposed export facility potentially impacted by this decision, CP2 with 20mtpa, or 2.7 Bcf/d, has not yet achieved a FID, nor does it have enough announced long-term sales contracts signed to cover the majority of its total capacity, hence it is outside the bank’s base forecast.
• The bank also noted that there are still 17 proposed US LNG export projects that have not reached FID yet, which will need a significant percentage of their capacity contracted via LNG supply deals to reach FID, whether DOE approvals are delayed or not.
• Global LNG supply capacity will increase substantially from 20245, meaning the global gas price curve may move lower relative to US gas forwards, which could leave some of the contracts out of the money for a few years, leading to fewer FIDs on the LNG export projects, the bank said.
• API CEO Mike Sommers answered to the news reports of the proposed regulation: “This would be a win for Russia and a loss for American allies…There is no review needed to understand the clear benefits of U.S. LNG for stabilizing global energy markets…This is nothing more than a broken promise to U.S. allies, and it’s time for the administration to stop playing politics with global energy security.