Column by Yuri Barsukov on Washington’s decision on future LNG export projects

In the ten days that have passed since US President Joseph Biden’s decision to temporarily freeze the issuance of permits for new LNG projects in the country, only the lazy have not spoken about this event in the global industry. For example, Shell CEO Wael Sawan said that such a move “undermines trust in the long term,” and the head of the American Petroleum Institute (the largest industry lobby) Mike Sommers called it “a victory for Russia and a loss for American allies, American jobs and the global economy.” climate progress.” The allies also did not skimp on compliments. Thus, the German SEFE (nationalized former Gazprom Germania), which was supposed to receive 2.5 million tons of LNG per year from the Calcasieu Pass 2 project starting in 2026, called the decision one-sided and threatening the stability and security of gas supplies to Europe. Japan’s JERA said the move threatens Japan’s fuel supply.

The question arises as to why gas buyers are so worried if the decision only affects new projects. The problem is that it also affects already concluded contracts for 20.9 million tons with companies in Europe, Japan, South Korea and China, and in such a short time it is incredibly difficult to find a replacement. Especially considering that at the same time the United States introduced sanctions against Russia, which could become the only real competitor for American LNG projects in terms of volumes and commissioning rates.

Analysts call the US President’s decision opportunistic and related to the upcoming elections this year: it was important for Joseph Biden to support large industrial gas-consuming companies, for which limiting exports is a guarantee of maintaining low domestic prices in the US. It is expected that the restrictions will be lifted in the future, especially if Mr Biden loses the election, as his most likely rival Donald Trump has already promised to do so on his first day as president. But for the market, the US’s inconsistency in export policy, given the country’s status as the world’s largest supplier of LNG, has become a wake-up call.

However, the facts suggest that most buyers of American LNG have very few alternatives, and Russia is not one of them. For Europe, a return to Russian gas is now hardly acceptable, and Japan and South Korea do not have access to it. The only major LNG buyer that truly has room to maneuver towards Russia is China. But China has already been reducing energy imports from the United States in recent years, but is not yet in a hurry to conclude new gas contracts with Russia.