By Anthony Harrup

President Trump's decision to lift the pause on new approvals for liquefied natural gas export terminals has generated enthusiasm about the prospects of the U.S. expanding global supply of the fuel.

There's little doubt the U.S., already the world's top natural gas producer and exporter of LNG, will continue to increase its output. However, global market dynamics, rising costs and increased competition from Qatar will affect exactly how much-- and where--this fuel goes. Qatar aims to double its own LNG output by the end of the decade.

"The permitting process is just one part of the overall equation that these projects need to solve to reach a final investment decision," said Fauzeya Rahman, LNG specialist at energy intelligence firm ICIS.

To be clear, former President Joe Biden's yearlong freeze on new LNG authorizations didn't stop projects that were already approved.

"What's already under construction, we expect to come to fruition," said Andy Huenefeld, managing partner at Pinebrook Energy Advisors.

But longer term, potential obstacles are more likely to be market related than regulatory. There are already counterparties hesitant to enter the kind of 20-year, take-or-pay agreements that the LNG industry is built on, he said. Under such contracts, buyers agree to take delivery of the product or pay a penalty.

"There needs to be the demand for it, and there needs to be assurance that if you're going to enter into this extremely capital-intensive construction project, you're not going to be left holding the bag if the global market is suddenly oversupplied in 10 years," Huenefeld said.

The U.S. has eight existing export terminals where natural gas is cooled into liquid form and shipped to other markets, where it is regasified for consumption. Five more are under construction along the Gulf coast between Plaquemines, La., and Brownsville, Texas.

In aiming to restore American energy dominance, as the White House put it, Trump expects more countries to buy U.S. LNG. He secured a pledge from visiting Japanese Prime Minister Shigeru Ishiba to work toward increasing Japanese imports of U.S. natural gas.

The U.S. has recently been exporting more than 15 billion cubic feet a day of LNG, according to data from S&P Global Commodity Insights, equivalent to about a sixth of U.S. daily consumption and enough gas to supply Japan for almost two days.

Analysts at Morgan Stanley expect U.S. LNG export capacity to nearly double by 2029 with the addition of about 11 billion cubic feet a day.

The resumption of LNG permitting may support more U.S. final investment decisions, "which we believe could potentially add 4-5 billion cubic feet a day of new demand above our base case in the late 2020s or early 2030s," they said in a report.

Natural gas demand in the electricity sector is likely to grow with artificial intelligence taking off and more power-hungry data centers being built. Technology companies aren't relying entirely on intermittent renewable energy to run the centers, which need round-the-clock power.

"Over the past decade, the world has been so obsessed with CO2 abatement, while meeting the world's energy demand. Going forward competitiveness and reliability will be of focus and that's where natural gas comes in," said Michael Morey, chief investment officer at Integrity Viking Funds.

Morey said his firm has started shifting its portfolio away from oil and more toward natural gas.

"I think it's going to be a fuel that we'll be using far, far longer into the future, because of its cleaner nature, its flexibility, its use in power generation," he said.

However, even with the Trump administration's fossil-fuel friendly stance, analysts expect the expansion of renewable energy, such as solar and wind power, to continue.

"You look at parts of the U.S. Transition technology--solar and wind--is pretty price competitive, so I think it carries on being built. But the big change we think will come from natural gas," said Alastair Syme, Global Head of Energy Research at Citi.

Natural gas is "a big cheap resource for the U.S." with an estimated 100 years of reserves at current rates of production, he said.

The principal incentives for the LNG expansion are an abundance of U.S. natural gas and the higher prices paid in other parts of the world. While U.S. natural gas futures are currently around $4 per million British thermal units, benchmark prices in Europe and Asia are closer to $15/mmBtu.

"The whole enthusiasm around LNG is that U.S. producers are wanting to get paid what global producers are getting paid for natural gas," said Christine Guerrero, strategic adviser at Octane Investments. "We have no way to use all of the natural gas that we produce, that's why prices go negative here. Everyone is desperately trying to monetize that gas."

Write to Anthony Harrup at anthony.harrup@wsj.com

(END) Dow Jones Newswires

February 19, 2025 14:51 ET (19:51 GMT)

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