Gas markets are weighing Biden's decision to suspend licenses for new export ports
Since the start of the Russian-Ukrainian war, European countries' dependence on American gas has increased in light of the policy of reducing dependence on Russian energy until the United States becomes the world's largest exporter of natural gas by 2023.
At a time when countries around the world are expanding their reliance on gas within the framework of “energy transition” governments, Europe has occupied the top destination for US liquefied natural gas in the past year, while in Asia Japan has been the largest buyer of US gas. , which will increase demand for natural gas facilities that are liquefied to meet global demand.
Last week, however, U.S. President Joe Biden surprised markets with a decision not to divulge this vision and to withhold permits to establish new liquefied natural gas export terminals or ports, which some experts say undermines credibility. America's gas markets on the one hand. . Others, on the other hand, saw the matter as a temporary decision linked to the presidential election scheduled later this year.
Former Egyptian Petroleum Minister Osama Kamal downplayed the decision's effects on global gas markets, telling Asharq Al-Awsad, “The decision is related to the suspension of licenses for new ports… while the old ones are exporting to Europe and Asia. Operating at the same capacity…”
Shell CEO Wale Chavan criticized the decision, saying in an interview with the Financial Times that it would “lead to an erosion of confidence” in the industry, which has become one of the pillars of the global energy system, and he downplayed it. Short and medium term effects.
The importance of gas in global markets is increasing, as a result of its adoption by governments as a temporary fuel within the “energy transition” policy pursued by most countries around the world to reduce carbon emissions, many consider it “clean”. Fuel.” Chavan believes Biden's decision “undermines trust in the long term.”
There are two reasons for Biden's decision
The Biden administration, according to the American magazine “Foreign Policy”, attributes this decision to two main reasons, the first of which is the ongoing fear that the large export of “cheap” American gas will destroy the American competitive advantage for cheap energy. It is particularly useful for energy-intensive, consumption-intensive industries such as the steel and petrochemical industries.
Second, the Biden administration has succumbed to environmentalists like the “Sunrise” movement and the “Louisiana Ship Project,” who believe that gas extraction has a major impact on climate change and its adversaries. “No cleaner than coal.”
Moreover, the decision serves the Democratic Party, whose popularity has been declining with the recent decline in Biden's popularity. So caving in to the demands of environmentalists may appeal to some, as was evident in Biden's statement announcing the move, “The temporary suspension of new permits for liquefied natural gas shows that the climate crisis is real. existential threat of our time.”
Gas and Coal
Over the years, U.S. gas has helped countries in Asia and Europe wean themselves off coal, after these countries reduced their dependence on Russian energy.
Business leaders in Asia and Europe have protested the shutdown, saying it would threaten their ability to find alternative energy sources. Buyers in those areas are particularly concerned. Japan, which relies almost entirely on imported energy, including liquefied natural gas, has announced it will begin looking for new suppliers amid uncertainty about the United States' future export share.
Cathy Michaels, Exxon Mobil's chief financial officer, criticized the decision, saying it would harm efforts to move countries away from coal. “Natural gas produced in the U.S. is less available to replace coal around the world, which is a bad thing,” he told the Financial Times.
Pierre Breeber, Chevron's chief financial officer, believes his company's position is that energy policy should not be a political issue. “The world needs cleaner, more reliable and more affordable energy,” he told the Financial Times.
He added, “U.S. LNG exports benefit this country: they create jobs and help achieve trade balance.” “It's good for our partners who are looking for energy sources … and good for the environment because … in many cases, LNG is replacing coal.”
Chavan is “firmly confident that the demand for liquefied natural gas will continue to grow… It plays a key role in energy security in regions like Europe and Asia, and it also plays a decisive role in the energy transition, as countries like China and India use gas to decarbonize and move away from coal.”
Shell plans to invest $4 billion annually in LNG projects through 2025 and increase its sales volume by 20 to 30 percent by 2030.
Chavan explained that the liquefied natural gas industry is “built on reliability and long-term security… anything that starts to undermine that… is not good for global markets”.
Republicans on the US House Energy Committee described the decision as “a gift to Russian President Vladimir Putin” and opposed the move, which they see as a threat to the security of US allies. Exports of liquefied natural gas weaken global energy security and undermine our efforts to help Europe reduce its dependence on Russian energy.
The House Energy Committee plans to hold a hearing next week to examine the economic and security implications of Biden's decision. Some Democratic lawmakers have said they plan to push Biden to reverse the temporary suspension, citing concerns about the impact on jobs in energy-producing states like Pennsylvania.
In a joint letter to Biden, the American Chamber of Commerce, the European Chamber of Commerce, and the Japanese Chamber of Commerce said: “In light of many expectations that global demand for natural gas will increase over the next decade, the need for additional supplies of liquefied natural gas will increase to meet the demands of global markets…” This demand is driven by emissions. We know that can be met to allow continued progress in reduction.”
In light of these data, Goldman Sachs believes that U.S. liquefied natural gas exports could nearly double if all licensed projects already built were to take action. The Energy Ministry's decision will not lead to any major tightening of global gas markets, as the affected projects will not enter service until at least 2027.