The Trump administration is pushing U.S. LNG in meetings with international leaders, but the real catalyst for additional investment in multibillion-dollar export ventures will come with a change in the way LNG terminals are financed, one energy consultant said.
While much of the LNG focus in Washington has been balancing the U.S. trade deficit and speeding up the regulatory process, Leslie Palti-Guzman, director of global gas at consulting firm Rapidan Energy Group LLC, said additional final investment decisions, or FIDs, depend on the ability to finance projects with shorter-term contracts.
"We are in a changing LNG market, where I think banks are slowly adapting," Palti-Guzman said Dec. 15 at an event at the National Press Club in Washington, D.C. She said FIDs should pick up in 2018 and 2019 as lenders finance projects backed mostly by 10-year contracts.
Behind U.S. LNG export projects already built or under construction are four that are fully permitted but missing the final go-ahead from developers. With ample supply in the global market, buyers have steered away from signing 20-year contracts that have supported the financing of facilities that can cost more than $20 billion. That has led to a drop in FIDs for new projects, which, if they stay the course, would join the six export terminals expected to be in service by the end of 2019.
In addition to a sixth liquefaction train at Cheniere Energy Inc.'s operational Sabine Pass LNG export terminal in Louisiana and a third train at its Corpus Christi facility under construction in Texas, the Magnolia, Lake Charles, Golden Pass and Delfin LNG export projects have received all major regulatory permits but do not yet have an FID. Developers have pointed to a tightening market and lengthy construction times as reasons buyers should shake off their hesitation and sign long-term contracts so new LNG production capacity can come online before a potential shortage in the early to mid-2020s. Despite aggressive marketing, just one company announced a new 20-year contract in 2017.
The Trump administration has plugged U.S. LNG exports in meetings with international leaders in one effort to lower the U.S. trade deficit. Most recently, U.S. Environmental Protection Agency Administrator Scott Pruitt touted LNG during a trip to Morocco. A handful of lawmakers have introduced bills aimed at speeding up the process for the U.S. Department of Energy's export licenses, and a push within the DOE is designed to facilitate small-scale LNG exports to the Caribbean.
John McCarrick, deputy assistant secretary at the U.S. State Department's Bureau of Energy Resources, said at the same event that the administration's push on LNG exports is primarily to reach potential buyers in other countries who may be skeptical that the U.S. will actually export the volumes projected.
"Sometimes it's just a matter of going around and telling people that," McCarrick said.
The U.S. government is also looking at ways to increase investment in emerging markets that would bolster natural gas demand. The U.S. Trade and Development Agency promotes American commercial interests in growing economies around the world. In November, it launched an initiative of trade missions and ongoing feasibility studies for pipelines, gas-fired power plants and other infrastructure in countries that could use American gas.
