Oil & Gas

Liquefied natural gas (LNG) has emerged as a significant growth driver in the energy sector due to its cleaner burning properties compared to coal and oil. However, its role in the energy transition remains uncertain. The ongoing demand for LNG remains strong, exemplified by Qatar's order of 12 new LNG carriers. Yet, expectations for future growth may fall short due to various challenges, including sanctions on Russian LNG and supply chain and regulatory issues affecting U.S. projects.

One major issue is the delay of the Rio Grande LNG export project in the U.S. due to a recent court ruling. The court's decision requires a supplemental Environmental Impact Statement from the Federal Energy Regulatory Commission, impacting the project's timeline. While Phase 1 of the project continues, subsequent phases, including the final investment decision for Phase 4, are likely to face delays.

Wood Mackenzie’s report highlights the risks associated with U.S. LNG projects, compounded by the Biden administration's temporary halt on export approvals earlier this year. This pause is expected to end after the November elections, but new regulatory frameworks will be necessary for future project approvals. Additionally, the Asian market, a significant driver of LNG demand, faces potential declines in demand due to nearing capacity in Chinese storage sites and sensitivity to price changes.

The potential increase in U.S. natural gas prices could further affect global LNG markets. A forecasted rise in U.S. gas prices might make LNG exports more expensive, deterring price-sensitive buyers in Asia and Europe. This is evident from the 20% decrease in LNG imports into Europe in the first half of the year and potential further declines. Additionally, Western sanctions and supply chain issues have hindered projects like Novatek's Arctic LNG 2 and Florida's Eagle LNG, while rising emissions regulations may drive up costs and influence market dynamics.