By Craig Mellow

Donald Trump is eager to flex U.S. hydrocarbon muscle, and mitigate trade deficits, by selling more liquefied natural gas. Beleaguered trading partners are happy to oblige, on paper. Both Japanese Prime Minister Shigeru Ishiba and European Commission President Ursula von der Leyen have promised to buy more.

Details promise to be devilish, however. The day he took office, the U.S. president canceled Joe Biden's moratorium on permitting new LNG export terminals. That unleashes more than a dozen pending projects, which could double U.S. export capacity by 2028, according to Washington's Energy Information Administration.

Such an investment flood, combined with a similar surge in the Persian Gulf petrostate Qatar, could tank the market, though. "We expect gas prices to fall in the coming years," says Jacob Mandel, research lead at Aurora Energy Research.

Investors expressed their own queasiness in response to the initial public offering of Venture Global, which came three days after Trump's inauguration. The company, which has two huge LNG projects in progress in Louisiana, lowered its target price by 40%. The stock has fallen another 40% in six weeks.

In market terms, the Trump administration is also talking to the wrong customers. Europe has been the top purchaser of U.S. LNG since Vladimir Putin cut off its Russian gas in 2022, gobbling more than 40% last year. But its appetite has probably peaked as it accelerates renewable energy and probably scales down energy-intensive industries like steel and fertilizers. "It's hard to imagine a situation where Europe will need more LNG," Mandel says.

Japan's LNG demand already shrank more than 20% in the past decade and should fall further as population declines and Tokyo shifts back toward nuclear power, says Anne-Sophie Corbeau, a scholar at Columbia's Center on Energy Policy.

Global demand growth depends on faster-growing Asian economies. "There's a pervasive belief that India and Southeast Asia will come to the LNG market's rescue," says Clark Williams-Derry, energy finance analyst at the Institute for Energy Economics and Financial Analysis.

The mature markets can still play a role in U.S. LNG expansion, since producers generally pre-book most of their expected output through long-term contracts. European or Japanese utilities could step in as off-takers, then resell gas they don't need on spot markets, explains Joseph Majkut, director of the energy security and climate change program at the Center for Strategic and International Studies. "They create a hedge for themselves that increases energy security," he says.

Japan looks particularly keen on this trade, as its conglomerates can sell infrastructure along with excess gas to emerging LNG markets, Williams-Derry says. "Companies in Japan are becoming LNG pushers, looking to make money on the re-gasification terminals and pipelines, too," he says.

Other Trump policy priorities could conflict with his LNG salesmanship. Tariffs on imported steel and aluminum will probably raise construction costs, Mandel says.

Lifting economic sanctions on Russia, which the Trump administration has dangled as part of a peace settlement in Ukraine, could shift markets more dramatically -- unlocking Moscow's own LNG expansion and possibly renewing flows of cheaper pipeline gas into Europe. "Russia has become one of the biggest questions again," Corbeau observes.

In the long run, liquefied natural gas still looks like an expanding industry that the U.S. is well positioned to dominate. Global demand should increase by half by 2040, predicts industry consultant Wood Mackenzie. That may not be fast enough for an impatient president.

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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March 06, 2025 12:57 ET (17:57 GMT)

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