North American LNG export capacity is likely to double by 2028, but only if projects under construction become operational on schedule, according to a new analysis from the U.S. Energy Information Administration. The forecast comes on the heels of the Department of Energy granting permits to New Fortress Energy’s Altamira terminal –a step in the right direction, but not an end to the controversial LNG pause that has been in place since January and has threatened to derail efforts to expand U.S. LNG export capacity.
As a reminder, the pause on LNG export permits is still in place until the Biden administration wraps up its evaluation of the climate risks and price impacts associated with American LNG exports. The pause was struck down by a federal judge in July, but the Biden administration appealed the decision, temporarily extending the viability of the permitting freeze.
New EIA data: US LNG capacity to grow
EIA finds that North American LNG export capacity could increase from 11.4 billion cubic feet per day (Bcf/d) in 2023 to 24.4 Bcf/d in 2028. This growth would be led by the United States, which is forecast to increase capacity by 9.7 bcf/d, or 85 percent of the projected growth.
The remainder of the capacity will derive from LNG export facilities in Mexico and Canada – the first to be built in these countries, according to EIA. Mexico’s LNG export capacity is forecast to increase by 0.6 Bcf/d as the Energia Costa Azul and Fast LNG Altamira FLNG2 facilities come online. Similarly, Canada’s three planned facilities – Cedar LNG, Woodfibre LNG and LNG Canada – will increase the country’s capacity by 2.5 Bcf/d by 2028.
Important caveat in the EIA analysis
On September 4, DOE issued its first permit to export LNG to countries without a free trade agreement (FTA) with the United States in place. This marks the first permit awarded since the White House instated its much-criticized LNG pause in January.
While Fortress Energy’s Altamira terminal was already exporting gas at maximum capacity to countries with FTA in place, New Fortress Energy is now granted the authorization to also export LNG to non-FTA countries. Non-FTA countries make up a substantial portion of new global LNG demand. Such countries include all European Union states, Japan, India, and others.
As a result of the permit issuance, the Altamira terminal will export up to 1.4 million metric tons of LNG a year to non-FTA countries for a five-year term ending in August 2029 – meaning the project will increase available exports to non-FTA countries by approximately 3 percent.
Regarding the recent permit of New Fortress Energy, Assistant DOE Secretary for the Office of Fossil Energy and Carbon Management, Brad Crabtree, said:
“These re-exports can diversify global LNG supplies and improve energy security for U.S. allies and trading partners.”
Despite this development, it is worth noting that New Fortress Energy had initially asked for their export term to last until the end of 2050, or 20 years longer than what they were granted. According to the DOE, the export term will be reevaluated “when it has a more complete record,” and New Fortress will be able to ask for the term to be reconsidered after a minimum of two years.
The fact that the export term was significantly reduced showcases that even while ad-hoc permitting resumes, substantial roadblocks and uncertainty remain for U.S. LNG developers.
Bottom Line: The EIA’s forecast that North American LNG export capacity will double by 2028 is welcome news but comes with significant caveats, namely the completion of the dozen projects under construction. And while DOE’s recent permit is a step in the right direction to achieving this, time will tell if the significantly shortened term limit alleviates investment uncertainty.
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