More than half a year after the Department of Energy (DOE) halted non-free trade (FTA) agreement permits for new U.S. LNG projects, the length of the pause and the potential impacts to the export supply outlook are still pending.
Immediately after the Biden administration ordered DOE to review its policies for authorizing more worldwide exports, the development timelines for at least 17 proposed liquefied natural gas projects fell into uncertainty. That list includes at least seven facilities proposed for the United States and Mexico that are commercially advanced, according to an NGI review of pending projects. Those seven projects amount to a combined 9.3 Bcf/d in export capacity previously expected to come online around 2030 that are now under increased risk for delays.
However, “given there are many projects with non-FTA approvals in place, and pre-final investment decision (FID) stage projects outside of the United States, near term global LNG balances remain unaffected,” International Gas Union researchers wrote in the industry group’s latest annual report.
Years To Come
What could be changing, in the meantime, is the amount of competition U.S. projects face in the global market when the regulatory review process at DOE resumes.
Several international projects have picked up momentum this year, especially Africa, Canada and the Middle East.
Researchers at consultancy Poten and Partners estimate the policy action could “delay most projects by at least a couple of years,” giving some international projects the chance to deliver volumes to the market before currently delayed U.S. facilities.
The administration has largely suggested the process could be completed by the end of the year, presenting more questions about when companies could expect answers on their non-FTA requests.
In early July, a federal court sided with 16 states that sued the administration over the pause. In the ruling, U.S. District Court Judge James Cain of the Western District of Louisiana ordered DOE to continue considering non-FTA permits while it conducted the policy review.
After the decision, it was still unclear whether the Biden administration would appeal or if permit decisions could still be delayed given DOE’s leeway with the pace of its decision making.
Even after the process is officially restarted, there is “significant uncertainty” over how the policy review may change the criteria for authorization and how long it takes the agency to begin working through the backlog again, Poten analysts wrote in a recent presentation. Those timeline pressures stand to compound the issues U.S. developers face with rising construction costs.
Key international buyers have stopped short of overtly disclosing that they are avoiding long-term commitments with U.S. projects impacted by the pause, but companies and governments dependent on a stable global LNG market have expressed concern since the regulatory action began.
In the International Group of Liquefied Natural Gas Importers’ latest report, President Jean Abiteboul said the pause “dropped a veil of fog” on the global market given the country’s outsized role as a stabilizing source of supply.
“The final quantitative effect of this pause will depend on how long the economic and environmental studies launched by the DOE will take and their findings,” Abiteboul said.
Climate And The National Interest
While a more concrete timeline has yet to materialize, Deputy Energy Secretary David Turk recently shed some light on what researchers at several DOE national laboratories are considering as the agency weighs how to change its policies.
Under the Natural Gas Act, DOE has the responsibility to judge whether an export project is in the national interest. Administration officials like Secretary Jennifer Granholm have mostly focused on the need to evaluate the impacts on domestic natural gas prices given the massive increase in LNG export capacity since the last review.
However, Turk confirmed during a June committee hearing in the House that researchers are also considering threats from climate change as a part of the national interest and are weighing both the emissions from U.S. upstream gas production and the burning of gas in foreign markets.
“We’ll be looking at the 20-year and 100-year models, and we’ll be looking at it in a variety of ways,” Turk said.
Deals And Delays
So far, no U.S. firm with an advanced export project has officially pulled the plug on a project since the pause began. Still, many have shifted guidance for a final investment decision into 2025 at the soonest.
On the other hand, the pause did not stop Venture Global LNG Inc. from negotiating a tentative supply deal for its CP2 LNG project in Louisiana that has big political implications for its argument that DOE is potentially hampering global energy security.
In June, the firm disclosed it had inked a tentative deal with a subsidiary of Ukrainian power producer DTEK with more than 2 million metric tons/year (mmty). The first volumes are expected to come from its Plaquemines terminal, currently under construction south of New Orleans.
After 2026, 2 mmty would be delivered from CP2 for the next 20 years.
Both European and Asian offtakers of CP2, as well as politicians and local community members, have participated in a letter campaign lobbying federal authorities to render a decision.
Venture Global recently received authorization from FERC for the 20 mmty facility sited near its Calcasieu Pass LNG terminal after 10 months on the docket. Now, the timing of the finalization of its contracts with more than nine different customers and an FID likely hinges on the end of the pause.
“We look forward to a swift non-FTA approval from the DOE for this project that is critical to both global and national security,” Venture Global CEO Mike Sabel said in a statement.
Sempra Infrastructure also landed an offtake customer and potential equity investor for its second phase of Port Arthur LNG while it awaits a non-FTA decision.
State-owned Saudi Arabian Oil Co., aka Aramco, signed a non-binding agreement for 5 mmty for 20 years from the 13 mmty project. It is also looking to take a 25% stake in the next two trains at the Texas facility.
Middle Eastern players like Aramco and the United Arab Emirates’ Abu Dhabi National Oil Co. have been making moves to expand their international gas portfolios, including with major U.S. LNG investments.
However, for at least one project, the pause has meant a major change in ownership. In June, Kimmeridge Energy Management Co. took a 90% interest in Commonwealth LNG, which is developing a proposed 9.3 mmty project in Louisiana.
Kimmeridge in 2023 signed on to supply Commonwealth with feed gas and take up to 2 mmty in offtake as part of a tentative equity deal. Now, after more than six months of regulatory limbo, Commonwealth could be getting an injection of capital needed to push it to FID.
Before the DOE pause was announced in January, Commonwealth had placed around one-half of its export capacity under contract with international buyers and U.S. production companies. It had previously targeted an FID for early 2024 with first exports sometime in 2027.
First cargoes are now projected in 2028 – if Commonwealth reaches a positive FID in the first half of next year.
Two nascent projects have also started the process for federal approval during the pause. In May, Gulfstream LNG Development LLC initiated the pre-filing process with the Federal Energy Regulatory Commission and completed a seed funding round for the 4 mmty project in Louisiana.
Argent LNG, which has proposed a 20 mmty project at the Port of Fourchon south of New Orleans, inked a lease agreement for a 144-acre project site. Worley is expected to lead the project through the pre-filing process as its engineering, procurement and construction firm by the end of the third quarter.
In the meantime, however, one project that was previously expected to reach FID this year may be headed for the list of terminals impacted by the pause.
Since March, Delfin Midstream Inc. has been looking for DOE to grant an extension of its in-service deadline from this June to June 1, 2029. At the time, the firm told DOE it had secured potential deals for 5.6 mmty of its capacity under tentative or binding supply contracts, allowing it to potentially sanction at least one floating LNG unit in the coming months once it received a license from the U.S. Maritime Administration (MARAD).
However, in April, MARAD ordered Delfin to submit another application for a license to operate its 13 mmty floating LNG project offshore Louisiana. Agency staff told the company MARAD was reconsidering authorization seven years after it granted a record of decision due to “widespread changes” in the design, financing and operation of the facility.
In early June, DOE told the company it would delay voiding Delfin’s non-FTA authorization while the project’s status was being reviewed, but going to FID before a decision is reached would be at Delfin’s “own risk.”
