Geopolitical Impact of U.S. LNG Export Pause and Global LNG Dynamics

Impacts of U.S. LNG Export Pauses: Global Gas Markets Adjust

The Biden administration's recent release of the final DOE study on LNG export applications has reignited discussions about the balance between climate goals and geopolitical strategies. The study, a crucial element in the decision to implement a pause on LNG export permits earlier this year, provides updated economic and environmental analyses that have not entirely satisfied industry stakeholders. Notably, the report's claim that LNG displaces renewable energy more than coal has prompted industry leaders to question its findings.

As 2024 unfolded, the U.S. saw a noticeable absence in new LNG final investment decisions (FIDs), with all major projects being launched in countries like Qatar, the UAE, Oman, Canada, and Mexico, totaling around 31 million tons per year (mtpa) of capacity. This shift underscores the broader consequences of the pause and emphasizes the Biden administration's focus on environmental priorities following the geopolitical turmoil initiated by Russia's 2022 invasion of Ukraine.

The uncertainty surrounding U.S. LNG exports prompted global trade partners to diversify their gas supplies, with European importers hedging their U.S. LNG bets against a potential resurgence of Russian pipeline gas. According to SynMax Leviaton, U.S. LNG accounted for 38 percent of European LNG imports this year, although it represented less than 20 percent of total gas imports, including pipeline supplies. Meanwhile, Asian nations, particularly Japan, have secured agreements with non-U.S. suppliers, maintaining their U.S. LNG reliance at 11 percent without new contracts in 2024.

Globally, the Middle East emerged as a significant player, signing 36 percent of new LNG contracts in 2024, as opposed to North America's 29 percent. This trend reflects a strategic move by consumers to contract with portfolio suppliers capable of offering diverse shipping routes and reducing geopolitical risks.

The U.S. permitting pause has given other LNG exporters an edge, allowing them to expedite project development and secure agreements with consumers who might have turned to U.S. suppliers. Although Qatar Energy aimed to utilize the U.S. regulatory hold to capture new markets, it still faces contract shortages. In comparison, Middle Eastern countries like the UAE and Oman have successfully expanded their market shares in 2024.