By Avi Salzman
Shipping natural gas around the world has become one of America's biggest export industries, worth twice as much as exports of American films and TV shows, and even more than corn. A new Biden administration study questions whether the industry's unchecked growth is a good thing for consumers and the environment. But with Donald Trump about to take office, the report looks more like a blip in support for LNG than a major challenge.
Big natural gas industry players like Cheniere Energy, Golar LNG, Energy Transfer, Exxon Mobil, Chevron, EQT, Antero Resources, and Expand Energy should see few regulatory constraints going forward.
America is the world's largest producer of natural gas, which is used to heat houses, power factories and generate electricity. About 20% of that gas is exported to other countries -- the majority of it transported in super-chilled liquefied form on tankers. Exports of liquefied natural gas, or LNG, bring in $34 billion per year, according to S&P Global.
The Biden administration says that the government has given enough permits to LNG facilities to supply global demand for the foreseeable future, and adding more capacity would cause economic and environmental harm.
The study, released by the Department of Energy earlier this week, calculates that wholesale natural-gas prices in the U.S. could rise 30% by 2050 if there were no limits placed on exports. Americans' annual electricity bills, it says, could increase by "well over $100" per year by 2050. American consumers would essentially be competing with consumers overseas. In addition, unlimited LNG exports would displace demand for renewable power in the future, leading to a surge in carbon emissions, the study says.
S&P Global released its own LNG report when the Department of Energy's study came out. Funded by the U.S. Chamber of Commerce but produced by S&P analysts, the report says that increased gas exports would have a "negligible" impact on natural-gas prices and Americans' electricity bills. And because LNG has become a substantial driver of U.S. GDP, slowing its growth could impact the broader economy, the report says.
"In just nine years, we've created a major U.S. industry," said S&P Global Vice Chairman Daniel Yergin. The S&P report also says that stopping additional LNG exports, as the government's study suggests, would likely result in dirtier fuels like coal sticking around.
It's a hot-button issue, for sure, but the practical impacts of the dispute are minimal. The Biden administration had paused new LNG permits in January as it drafted the study, putting at least half a dozen projects on ice. But several planned export facilities already have permits, and the U.S. is on track to double LNG exports by 2030 even without any new permits.
The Biden study didn't appear to affect natural gas stocks, which have risen since Trump's election. Trump is almost certain to overturn any limits as soon as legally possible. "We anticipate Trump will end the pause by Executive Order, tasking DOE with resuming issuance of export licensing, and structuring a new standard which presumes all LNG exports are in the public interest," wrote TD Cowen analyst John Miller.
The LNG market still faces challenges, including the possibility of a looming glut a few years from now. Australia and Qatar are also investing heavily in expanding LNG exports, and there could be an oversupply if several projects come to market at the same time. Demand could also falter. Europe needs a lot of gas today, but if the continent is able to add enough solar panels and wind farms, it could cause gas demand to fall.
Still, a glut could take years to develop. Morgan Stanley analyst Devin McDermott says that construction delays have pushed back new supply. He recommends buying shares of natural gas producers EQT and Antero Resources, which should benefit from the increased demand for natural gas for export.
Write to Avi Salzman at avi.salzman@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
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December 19, 2024 04:00 ET (09:00 GMT)
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