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Your guide to what the 2024 US elections mean for Washington and the world
President-elect Donald Trump famously wants to make America great again. But at least one of his policy ideas has the potential to also give European industry an advantage.
Trump has promised encourage upstream production – to a refrain of “drill, baby, drill.” It is also expected to raise a Joe Biden era moratorium on licensing new liquefied natural gas export facilities.
These measures would have an incremental, rather than revolutionary, impact. Natural gas production in the United States has increased to record levels of about 125 billion cubic feet per day, almost half more than in the last decade. While reducing royalties, compliance and costs could give drillers additional incentive, the increase would be limited by downward pressure on oil and gas prices.
Meanwhile, the “temporary pause” in new authorizations for LNG terminals affected projects in previous stages. A reversal would not have an immediate impact, although it certainly strengthens the prospects for greater LNG supply in the medium term. woodmackenzie has estimated Nearly 90 million tonnes per annum (mtpa) of US projects were awaiting export approval.
All of this is important because it comes against the backdrop of an LNG market that is already bracing for a glut. Projects with 130 mtpa of capacity are scheduled to come online between 2025 and 2027, equivalent to 33 percent of existing LNG capacity, according to Bernstein’s analysis.
This figure is lower than estimated because the projects suffer delays and complications. But it still far exceeds the demand growth expected in the period. As this flood of supercooled fuel reaches European shores, it will almost certainly drive down prices.
Market forces, then, are conspiring to bring cheaper gas to Europe, at least for some time. Geopolitics raises more questions. Trump’s campaign included a promise to take Russia’s war to Ukraine. to a quick conclusion. The president-elect’s ability to do this remains questionable. It would have far-reaching implications, of which energy (given Russia’s enormous gas reserves) is just one.
Over the next year or so, the market will continue to be subject to volatility attacks —particularly if Europeans were to suffer a seasonal cold snap. LNG supplies remain reasonably limited due to delays and outages, but European gas demand remains well below pre-crisis levels. However, beyond that, the supply continues to arrive, and in greater quantities.
For European industries facing tariffs, especially those in energy-intensive sectors such as chemicals and steel, the prospect of a medium-term fall in energy prices would come as some relief.