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Trump's Russia, trade stances cloud outlook for gas exports, LNG watchers say

President Donald Trump's administration is likely to bring key victories for LNG exporters, but industry observers pointed to some of his policies, including a protectionist economic platform and the potential for improved relations with Russia, as creating uncertainty for the fledgling U.S. industry.

While former Texas Gov. Rick Perry is expected to expedite the approval process for LNG exports if confirmed to head the U.S. Department of Energy, Trump's emphasis on "America first" policies calls into question whether the administration would shift its views on natural gas exports if prices rise, panelists said at a Jan. 26 discussion hosted by the Atlantic Council's Global Energy Center.

"The president made clear during the campaign that gas exports is something that he wants to encourage," said Richard Morningstar, founding director and chairman of the Global Energy Center and a former U.S. ambassador to Azerbaijan. "But it's not as easy as basically making a statement. There are a lot of complex questions that relate to it."

Higher gas prices would help U.S. LNG export projects gain traction, but they could also make the administration less willing to allow exporters to ship the fuel abroad out of fear that domestic energy prices would rise for U.S. consumers, said Agnia Grigas, a nonresident senior fellow at the Atlantic Council. The question becomes whether the DOE under Trump would move to slow or halt export authorizations should the glutted market tighten and prices get a boost, Grigas said.

Suedeen Kelly, a partner at Akin Gump Strauss Hauer & Feld LLP and a former FERC commissioner, said the agency could. "The secretary of energy has the power to put conditions on the export licenses, and has in fact done that," she said. "So far, they have reserved that power ... so we'll watch with interest to see whether that policy changes."

Some Senate Democrats have called on the DOE to slow its authorization of exports, saying the agency should fully evaluate how the cumulative volume of approved exports would affect domestic energy prices. But other congressional members who supported a quicker DOE approval process point to the well-supplied U.S. gas market as evidence that shipping LNG abroad would not have any real impact on domestic prices. They say exports would instead bolster energy security while taking advantage of the country's vast supply of shale gas.

Trump and his pick to serve as secretary of state, former Exxon Mobil Corp. CEO Rex Tillerson, have both indicated a willingness to improve the relationship between the U.S. and Russia. But closer ties to the nation that runs the giant gas company Gazprom may be at odds with the reality that Russia and the U.S. compete for gas market share, Grigas said. "They're both natural gas producers, they're both exporters, and certainly for Russia, energy exports have always been crucial," she said. "Russia has worked hard to try to maintain and hold on to their markets, so I think there will be this conflict of interest as we move forward."

Weaning Europe off Russian pipeline gas has been a rallying cry for those who support U.S. LNG exports to countries such as Poland and Lithuania. Trump and Tillerson are "highly unlikely" to go against U.S. energy interests by decreasing LNG exports in order to "win favor with Moscow," Grigas said in an email. But she added that it is possible the new administration will lobby less for transitioning southern and eastern Europe away from Russian gas. "This is where Gazprom has a near monopoly over the market, and also where the U.S. LNG exports are less able to compete with Russian gas," she said.

Russian relations aside, the economic feasibility of shifting European demand toward U.S. LNG is limited, Grigas said. "While U.S. LNG exports to Europe would be greatly symbolic, and in fact they have been successful with exports to Spain and Portugal, in reality they would have difficulty competing in some parts of Europe, particularly with countries that are closer to Russia."