Biden’s LNG ‘pause’ impacts 4 major projects
Four multibillion-dollar liquefied natural gas projects under development by Texas companies are in limbo after the Biden administration paused liquefied natural gas export permitting last week, jeopardizing hundreds of millions of dollars their developers have invested.
The administration has said it is reviewing the export permitting process to see how these projects, largely concentrated along the Texas and Louisiana coasts, can impact climate change. While the pause has no impact on fully permitted projects already under construction, it throws a wrench in a long, costly process for others that were already years into the development of multibillion-dollar gas export projects.
“Anyone who’s ready to start construction — to have anything that causes them to wait puts the project into a dilemma,” said Meg Gentle, executive director of Houston e-fuels company HIF and former CEO of LNG company Tellurian. “Uncertainty is the enemy of investment, always.”
LNG buyers are already reviewing their options, including new talks with fully licensed projects and suppliers outside
the U.S., Bloomberg reported.
For developers that were preparing to start construction, the pause has the potential to cost hundreds of millions of dollars, said John Hritcko, retired energy executive and consultant with experience developing LNG projects. An interruption in the process could disrupt their discussions with lenders, their contractual obligations, and throw snags into their supply chain, he said.
“Time is money,” Hritcko
said. “It’s not good for the project sponsors that were almost across the finish line and now they have to wait for these studies.”
Yet, while the pause deals a blow to individual projects, analysts said the global market should handily absorb the delay in production growth. Energy consulting firm Wood Mackenzie was already predicting a slowdown in LNG investment decisions this year because “the global LNG market looks well supplied in the second half of the decade,” Giles Farrer, its head of gas and LNG asset research, said in a research note.
“We expect there to be a significant market glut developing probably around 2026,” Clark Williams-derry, an energy finance analyst for the Institute of Energy Economics and Financial Analysis, said during an interview. “The market can easily absorb a pause in U.S. LNG construction.”
Gulf Coast LNG projects
The four impacted projects must now wait until the DOE completes its review before they can move forward.
Two of the projects, an expansion of Port Arthur LNG under development by Sempra Infrastructure, California-based Sempra’s Houston subsidiary, and Houston-based Commonwealth LNG’S marquee project in Louisiana, were near the regulatory finish line before the pause. The U.S. Department of Energy was reviewing fresh permit applications for two others, Energy Transfer’s Lake Charles LNG and Glenfarne’s Magnolia LNG, after the department declined to extend construction deadlines tied to their original export permits.
Commonwealth had already been waiting more than a year for the DOE to approve its export permit after the Federal Energy Regulatory Commission greenlit the project in November 2022. The Biden administration has had “more than ample time” to review the potential climate impacts from the project, the company said in a statement.
“Today’s action by DOE seems especially punitive to Commonwealth,” it said in a statement following the DOE announcement, “given that DOE has already had our permit application under review for an unprecedented period of four years from our initial application.”
Commonwealth, Sempra and Glenfarne said in statements that they remain committed to developing their projects. Energy Transfer did not reply to a request for comment. Sempra said it is working to reduce the carbon intensity of its LNG projects. Glenfarne said demand for LNG remains strong and it is confident that the DOE’S analysis will demonstrate the role the fuel can play in the energy transition.
“DOE’S actions do not dampen our efforts and commitment to commercialize Magnolia LNG nor the demand for our product,” Glenfarne Energy Transition CEO Brendan Duval said in a statement.