Biden’s LNG Pause Has Asian Fuel Buyers Hunting for Other Options

(Bloomberg) -- Asian liquefied natural gas buyers have begun looking for alternatives to offset potential delays to US projects hit by a moratorium on new approvals, in a potential boost for rival exporters.

Buyers, including those in major importers China and Japan, are reviewing options including new talks with already-licensed projects in the US or suppliers from other nations, according to people with knowledge of the matter.

While the consumers aren’t proposing to break any existing contracts, some of which are binding, they are looking to have alternatives in place in case the US pause on approvals leads to major delays, said the people, who requested anonymity to discuss private deliberations.

Japan’s Trade Minister Ken Saito said Tuesday that his nation would take the necessary steps to ensure energy security amid concerns about delays to future US production. Jera Co., Japan’s biggest LNG importer, said in response to questions that even a temporary pause to new licenses for US projects could cause concerns for global energy energy security, given its importance as a supplier.

The Chinese Foreign Ministry didn’t immediately respond to a request for comment about the US decision.

Approvals of new licenses for LNG export plants in the US have been halted while their potential effects on climate change, the economy and national security are reviewed, the US Energy Department said Friday. Business organizations from the US, Europe and Japan have called on the Biden administration to reverse the decision. 

The US has become the world’s biggest exporter of the heating and power-station fuel, driven by ample supply from shale deposits and demand from European buyers looking for alternatives to pipeline gas from Russia. 

Buyers can turn to other export projects in countries including Qatar, Canada or Russia, with the start of new plants over the next few years seen resulting in a glut in the second half of this decade. Two LNG facilities — both outside the US — are likely to reach final investment decisions this year, BloombergNEF analyst Lujia Cao said in a note published Monday.

Several Asian buyers have ties to US projects impacted by Biden’s review, according to data compiled by BNEF: 

• ENN Energy Holdings Ltd., China Gas Holdings Ltd. and SK Gas Ltd. have contracts with Energy Transfer LP’s Lake Charles plant in Louisiana, which is seeking an extension of an export license
  • A Japanese consortium has a heads of agreement with the facility
• Bangladesh’s Summit Oil and Shipping Co. has a heads of agreement with Commonwealth LNG
• China Gas and Japan’s Jera Co. and Inpex Corp. have contracts with Venture Global Inc.’s CP2 project

Jera believes that the realization of Venture Global’s CP2 project, as well as other US export plants, are important for stable supply to the world, and will be closely monitoring developments from the US government, the company said. The firm said it will also work together with public and private sectors to respond accordingly.

(Updates with Jera comment in the fourth and last paragraphs.)

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