Can the Global LNG Market Support U.S. Export Ambitions?

The United States emerged as the leading global exporter of liquefied natural gas (LNG) in 2023, surpassing long-standing leaders Qatar and Australia.  Looking ahead, U.S. LNG exports are projected to double by the end of the decade as new export facilities are developed along the U.S. coastline.

This rapid expansion has intensified concerns regarding the environmental and community impacts of extensive LNG export projects.  Additionally, the swift development of LNG projects raises questions as to whether the global market for natural gas, often referred to as a “bridge fuel”, will support substantial investment and long-term operation of new LNG projects.

Anne-Sophie Corbeau, a global research scholar at the Center on Global Energy Policy at Columbia University, examines the future of global LNG demand and how it may support future supply additions in the U.S.  She also discusses the potential for global LNG oversupply and factors that could affect the competitiveness of the U.S. industry in a potentially saturated market.

Full Transcript

Andy Stone: Welcome to the Energy Policy Now podcast from the Kleinman Center for Energy Policy at the University of Pennsylvania. I’m Andy Stone.

Last year the United States became the top global exporter of liquefied natural gas or LNG. This is a remarkable achievement for a country that reentered the LNG export market just eight years ago, surpassing longtime leaders Qatar and Australia. The future looks promising for the US LNG industry, with projections suggesting that exports will nearly double over the next four years, as new terminals open along the US coastline. Yet this rapid development has raised concerns about the environmental and community impacts of sprawling LNG projects, as well as the potential for growing exports to drive up natural gas prices for American consumers.

In today’s podcast, we’ll explore another controversial aspect of the industry, whether the global market for natural gas, often referred to as a “bridge fuel,” will justify the substantial investment and long-term operation of new LNG projects. Specifically, will LNG demand be as great as some expect, and will the US maintain its competitive advantage as an LNG supplier?

Today’s guest is Anne-Sophie Corbeau, a global research scholar at the Center on Global Energy Policy at Columbia University. Anne-Sophie, who is a former Head of Gas Analysis at BP, will discuss the global LNG demand outlook and examine whether it supports aggressive investment in US LNG infrastructure. Anne-Sophie, welcome to the podcast.

Anne-Sophie Corbeau: Hello, Andy. It’s nice to be here.

Stone: The US LNG industry has grown dramatically since LNG exports resumed in 2016. Can you start us out by describing the global role and importance of the US LNG industry?

Corbeau: Yes, indeed. As you stated before, the US is now also the largest LNG exporter in the world. To put things into context, US LNG exports last year were about 120 billion cubic meters out of a total global LNG trade of 550 billion cubic meters. So this is roughly 22% as a total. The US is the leader, ahead of two other countries, which are Qatar and Australia. As you stated, the US LNG exports have grown massively, given that they started from the low 48 in 2016 only, with the first LNG export terminal at Sabine Pass.

Stone: So at least five new terminals are under construction now in the US. However, the Department of Energy recently issued — I believe that was in January — a pause on new LNG exports to non-trade partner countries. How much new LNG export capacity is actually in the works, and what is the impact of DOE’s pause on projects at this point?

Corbeau: So the projects which are under construction roughly are going to double current LNG exports from the US. So we will go to 230 billion cubic meters when everything is going to be built, and maybe a little bit beyond that, if there is some debottlenecking. But roughly you can count on the doubling of US LNG exports, which is very significant when you’re thinking about the size of this expansion, compared to anything else. Qatar right now is only exporting about between 105 and 110 billion cubic meters, and Qatar was the leader before. So we are definitely looking at a very sizeable expansion.

The funny thing is that I was in New York — usually I am based in Paris — when my boss stormed into my office and said, “Oh my God, the White House is thinking about having this pause on US LNG.” I looked at him, and I said, “Well, there is so much which is under construction anyway,” and I was not only thinking about the US. I was thinking globally because the LNG industry tends to operate by waves. So we are the first wave, which was really driven by Qatar about 2009 to 2011. At that time, we had a little bit more than 100 billion cubic meters in terms of LNG export capacity.

Then we had a second wave, which was the US and Australia expansion in 2015 to 2019, and we added about 200 billion cubic meters of LNG. And now we are looking at the third wave. If I’m looking only at the period of 2024 to 2028, we are adding about 280 billion cubic meters of LNG export capacity. So make no mistake. We have never built so much LNG export capacity. There is no shortage. The big question is: Where is this demand going to be? We have a lot of supply coming on the market. So that was my first reaction.

Of course there are a lot of projects which are at the planning stage. Some are relatively advanced in terms of the marketing. Some were actually much less advanced with the marketing but had all the authorizations. So we have a mixed bag, and I think those projects which were the most impacted were those which were relatively advanced in terms of the marketing, and everybody knows, for example, about the venture global oil Calcasieu Pass 2 project, and there were a few others, as well, like Lake Charles, Commonwealth, and Delfin LNG.

And for these projects, it’s very important to try to move forward, but at the same time, they cannot move forward without having enough contracts attached to them. So for me, I was looking at that from a relatively detached point of view, maybe, thinking, “Well, let’s absorb the additional LNG first.” And also to those people who are going to say, “Companies want to contract more LNG.” Well, there is a lot of LNG to be contracted. There is a lot of LNG to be still contracting within the US LNG projects which are under construction, which are not going to be impacted by the DOE pause.

There is also a lot of fed NG to be contracted by final buyers from those companies which are acting as aggregators, like the Shells, the BPs, the Totals, et cetera, so you can buy directly from them if you don’t want to be bothered by dealing with the LNG  cargoes. You have also a lot of LNG to be contracted from other suppliers in the world, like Qatar, for example. Qatar has a lot of LNG to be contracted.

So there is not a shortage of LNG to be contracted. We should actually be thinking, “Well, is all that LNG going to be really needed?”

Stone: I want to get to that question, but I want to stay on the point of the contracting for just a moment. My understanding is that the way that the US LNG industry contracts are a little bit different and maybe somewhat innovative relative to what came before. Can you talk a little bit more about that?

Corbeau: When US LNG started with the new business model, everything was a bit innovated by Charif Souki. They introduced two things. They introduced something in terms of the pricing. So usually the price of LNG was very often linked to a basket of oil prices. We called that “oil indexation.” So we have something that we call a slope, which is a ratio between the oil price and the gas price.

For example, if I have a 15% slope, and the price of oil is 100 dollars per barrel, then the resulting price for LNG would be 15 dollars per MmBtu. So this is like that, that a lot of the contracts were actually working. There had been a little bit of innovation with some people trying to have, for example, prices in Europe being used as a price for the gas in their LNG contracts. But most of the gas was still linked to oil prices. So that was the first thing.

The second thing is that US LNG, especially the first contracts, were actually — you have enough takers, you take the LNG directly at the LNG terminal, and then you are free to set it wherever you want. So this flexibility was particularly appealing for many buyers, and it is still very appealing to many buyers. You can do whatever you want with it, which actually in 2022 was particularly useful because I don’t think before a lot of people were contracted to US LNG were particularly looking at Europe as an appealing market. But eventually, they realized in 2022, even the level of prices, “Oh, wow. This is super interesting.” So they sent all the US LNG to Europe because the prices were so high.

Stone: So before there wasn’t that flexibility, LNG had to go to its contracted destination, it sounds like, and that was the end of the story. Now there’s more flexibility in that to respond to immediate market needs and changes in the market. Is that essentially what that’s about?

Corbeau: Yes, I think there was less flexibility. When it started, LNG was considered as a kind of prouveur of the pipeline. So basically you had liquefaction terminals, dedicated cargoes going to specified liquefaction terminals. Of course over time, and especially at the beginning of the 2000s, with the liberalization of the European markets, you had more and more flexibility. But the US definitely gave a boost in that flexibility by having this kind of flexibility of the destination. It doesn’t prevent some of the companies which are buying the gas, US LNG, for their own market to say, “I am buying that gas, but I’m still going to sell it, say, for example, to Japan or to Korea or to China.” Typically this tends to be the Asian markets which like to get the LNG for their own market. But flexibility existed before US LNG. It had a booster effect on the global LNG market.

Stone: So we’re going to be looking at how global LNG demand might support the planned expansion of the US LNG industry. It’s interesting because Shell’s latest global LNG demand forecast points to 50% demand growth by 2040, or even a little bit above 50%. That forecast seems a little surprising, or can seem surprising, given the fact that natural gas is often billed as a “transition” or a “bridge fuel.” What’s your view on this forecast?

Corbeau: When I heard about this forecast, I was reading a couple of news articles, et cetera, and everybody was like, “Oh, wow, +50%.” And I was like, “That’s it?” It doesn’t sound particularly fantastic, given the fact that we are actually expanding the capacity by about 50%. I looked at the graphics, and I was comparing side by side the 2023 forecast with the 2024 forecast. And I was looking at the demand, which looked a little bit lower in the new vintage. And of course the supply side was a little bit higher because a new project had been sanctioned between 2023 and 2024.

So overall, there was a big message in terms of, okay, there is still a gap to be filled in the 2030s. So a gap between expected demand and the expected supply was shrinking quite a bit from 2023 to 2024. And the demand forecast, with that being used, so there is a range, but these tend to be business-as-usual forecasts. However, when you are looking in particular at some IEA forecasts, they also have scenarios which are well below two degrees, and when it was used and when it was not used. And these scenarios tend to be actually much, much lower in terms of future LNG demand. We have LNG demand peaking in the late 2020s, 2030s. So suddenly you are like, “Hmm, that doesn’t look particularly optimistic for the global LNG, if even Shell is giving us only a +50% increase in global LNG demand.”

Stone: The outlook for LNG demand also varies significantly by region. And the global order, in terms of LNG demand, I think, is — from my understanding — rapidly evolving. I’d like to look at that global picture, but first I’d like to start out with the European demand. US LNG exports have been viewed as key to providing energy security for our European allies, particularly since the outbreak of the War in Ukraine. And this idea has been referenced as one justification for the development of more LNG export capacity in the US, again, to serve Europe. However, Germany, which is the biggest gas market in the EU, appears to have its supply covered, at least for the moment. To what extent is additional LNG supply from the US or elsewhere, at this point needed in the EU?

Corbeau: Okay, so let’s look at the first European gas estimate picture. In 2021, before the crisis, we had a gas demand of about 400 billion cubic meters. Last year, we were down at 320, so we have lost 20% in two years. Twenty percent. And it’s still dropping slightly at the beginning of the year. And it is across all of the sectors, so you have the residential gas demand dropping, so there was a little bit of weather effect, but there has been also a lot of energy efficiency and energy conservation. People were turning down their thermostats because, “Hey, the heating bills are pretty high.” So that’s the first thing.

Industry or demand has also been quite decimated. The prices have been so high that companies have reduced where simply their industrial output because suddenly they were no longer competitive on the global market because most of these companies are actually companies which are active in sectors where this is highly competitive. So if their energy costs are not too high, they are out of the market. And you can think about, for example, 30 days of producers or glass manufacturers or steel manufacturers. So this is something that we are seeing.

And then finally last year, we also saw a big demand in the power generation sector. So 2022 was a little bit of an outlier in terms of power demand and gas demand in the power sector because we had much lower nuclear generation, much lower hydro generation. So actually gas demand didn’t drop in the power sector. But last year, because nuclear basically normalized, and the height will be covered, and the electricity demand was still down, then hey — gas demand dropped quite significantly.

Looking forward, we can expect the situation on nuclear and hydro to normalize, and of course a big increase in terms of renewables, because this is part of the trajectory, this is part of the ambitions of the WePower EU plan. So that means that the fossil fuel generation, both coal and natural gas, are going to shrink even further. So what kind of picture does that give us in terms of demand in Europe? Well, it’s going to continue slowly to decline. We don’t really expect to see a big recovery in terms of industry or demand, and we have actually, at the Center of Global Energy Policy published a report on that with my colleague Akos Losz.

So when you are looking at all the sectors, this is really pointing towards a drop in demand. Now, you are looking at LNG and the whole of LNG. So let’s have a look at what kind of suppliers we have. Okay, no way, probably going to be relatively stable. North Africa may be on a slight decline. Domestic production, including biomethane, may be in slight decline, but because of biomethane, it might actually stabilize.

And of course we are going to lose the remaining pipeline gas coming from Russia, or will be by the end of the year, as the contract with Ukraine would be stopped, and then maybe the final volumes which are still coming to Europe, especially towards Hungary, might be finally interrupted, or maybe not. But definitely Russian gas is going to be much lower by the end of the decade.

So that doesn’t paint a particularly good picture for additional LNG demand in Europe, I am really sorry to say, but at the very best, it’s stable. And probably it’s going to drop, make no mistake. So you are talking about Germany. Germany is a small player in the big picture of the European market. It’s only importing about 7 billion cubic meters last year. If you want to look at the big market for LNG, you look at France, you look at Spain. But right now, this is not yet Germany. And also Germany is getting LNG from other countries, so sometimes it’s a little bit blurred. The problem with Europe is that our market is so integrated, that you have to follow the flows of the gas and of the LNG. But one of the largest suppliers for Germany is currently Norway for LNG.

Stone: I want to correct something. I said that Germany is the biggest gas market in the EU. Is that not correct?

Corbeau: It is correct; however, it’s the biggest gas market, but it’s not the biggest LNG buyer. So this is slightly different. But demand in Germany, like in the rest of Europe, has dropped quite significantly. Before the crisis, it was in 2021 — it was about 93 billion cubic meters. Last year it was 76 billion cubic meters, so we are seeing a big drop in gas demand in Germany, as well.

Stone: Germany has, as I understand, a number of LNG import terminals planned or proposed. Is that correct?

Corbeau: This is correct. We have already existing LNG terminals. There are three started to be installed at the end of 2022, so we have LNG terminals in Wilhelmshaven and in Brunsbuttel. And there are a few of those which are going to be installed. However, an important thing is that you should not actually mix import capacity with actual imports. And also there is something which I know is very puzzling for American players. They don’t understand why, when we had such crises that we were experiencing, there was not a flood of LNG buyers coming from Europe and asking to buy US energy. I know this has been very puzzling, so let me explain why.

We have targets in Europe, we are wanting to reach net-zero targets. There is a goal in terms of renewables. So for a lot of the utilities, they are looking at declining gas demand, but they just don’t know how fast. And they don’t want to be stuck with contracts that they don’t know what to do with. So when you have a new project in the US which may be starting in 2027, 2028, and the sponsors behind these projects are saying, “Well, we want to have a 20-year contract.” So this is pushing you to 2047, 2048. And remember that you should not have long-term contracts beyond 2049 in the EU.

So for utility in Europe, we don’t really want to have 20-year contracts. They would be probably happy with a 10-year contract; but a 20-year contract — they need to think about what they are going to do with that LNG. Probably, “Okay, I’m taking the LNG, but eventually I’m going to be sending it somewhere else.” Some buyers may be happy to do that. Those who are already sort of aggregators, like NG, et cetera — those want to become actually aggregators and global LNG players like SEFE in Germany, which currently is buying for its one market, but eventually it wants to also become a global player.

So when the US LNG exporters are saying, “Oh, but we have interest from these guys here.” you should be actually thinking, “Are they interested in US LNG because they want to feed the European market or because they want to have actually a global presence?” And I think this is more the second thing. This is why they are particularly interested in US LNG, because of the flexibility. If you are looking at the Qatari contract, they are much less flexible, especially the last ones, which have been signed.

Stone: I want to jump there from EU and Germany to Asia, where I think a similar dynamic is playing out with Japan. But the big story in Asia, I believe, the overarching story is that China has recently supplanted Japan as the largest market for natural gas in Asia. What is driving that demand shift? And what does that shift mean for the Asian LNG market overall?

Corbeau: So the story between China and Japan is complicated. First of all, you have the gas markets, and China is by far the largest gas market in Asia, a bit more than 400 billion cubic meters. So this is the giant. But actually, a lot of their gas is coming from domestic production, and because the Chinese are absolutely obsessed with not having imports beyond or above 50%. Now, when you’re looking at Japan, their market is roughly a quarter of that, about 100 billion cubic meters. However, what we have seen of those in the past few years is that because you have growth in terms of nuclear generation, a bit more — you may put it as LNG, as well. Then you know there is a demand for LNG in Japan, which is almost completely dependent on imports, anyway, and LNG imports in particular are dropping.

China has been doing ups and downs. So in 2021, they were actually the largest LNG importer in the world. However, in 2022, their gas demand dropped slightly, and their LNG demand, their LNG imports, dropped by 20% in 2022. Actually, that helped quite a bit Europe because that LNG was redirected to the European market. And then in 2023, it rebounded, and we are expecting in 2024 to be at or slightly above the 2021 levels. So this is what is happening.

But in 2023 already, China became again, after the drop in 2022, the largest LNG importer, ahead of Japan.

Stone: So I understand talking about Japan. Japan’s domestic demand for gas and for LNG is declining. But Japanese utilities are investing heavily, so I’ve read, in other parts of Southeast Asia in LNG infrastructure, so that those Japanese utilities with contracts can send that gas on elsewhere. They’re also becoming sort of a middle player, as you’ve described Germany doing.

Corbeau: Exactly, yes. They are becoming aggregators, as well, so I’m sure you are, for example, alluding to companies such as JERA, which is, indeed, for that specific reason, interested in flexible LNG that they can use and disperse — maybe to Japan; maybe to other Southeast Asian countries. They are also trying to develop or boost LNG demand in other countries in Southeast Asia. And this is not always easy because the problem with Southeast Asia is what happened already in 2022. Prices were super high, so LNG was never accessible nor available nor affordable. So this has been a big problem.

And the big problem also in Southeast Asia is the affordability of LNG. It needs to be roughly between 6 and 8 dollars per MmBtu. Right now the prices that we are seeing are about 12 dollars per MmBtu. So affordability is very important because in the power generation sector, the competitors are going to be coal or the expansion of renewable electricity. So you need to basically find a way to be more competitive than coal. So who is willing to sell LNG at core competitive prices in Southeast Asia? But this is also what a certain number of companies are trying to do, and players like JERA are also trying to expand their LNG demand and their LNG portfolio in Southeast Asia.

Stone: So again, what the Japanese utilities are trying to do is stoke new natural gas demand in Southeast Asia, as you mentioned. The economics of LNG may or may not support that. And there is another little factoid that I want to bring up here, the fact that I’ve seen that there are forecasts generally for LNG oversupply at some point not too far into the future that would, I guess, imply falling natural gas markets, and the Japanese utilities involved in this would be exposing themselves to significant price risks there.

Corbeau: Yes, as I mentioned, we are looking at the largest expansion of LNG export capacity that we have ever seen. So there is roughly about 280 billion cubic meters of LNG capacity coming online between 2024 to 2028. So this is gigantic compared to the 550 bcm of existing LNG trade. So of course some of that supply from existing players might go down slightly. In places like Australia, for example, we are seeing that is struggling and is actually turning back to imports. But there is still a lot of capacity. So the question is how fast this supply is going to come online, and how fast this supply is going to be absorbed by the developed markets. And indeed, one of the answers is definitely going to be much lower gas prices.

So it depends also on how the companies are going to contract. So at what price are they going to contract? And in particular for US LNG, that means what is going to be the prevailing Henry Hub price, because very often the price of gas is, in the US, linked to the Henry Hub gas price. And also, what is going to be the price at which the companies are setting the gas on the different markets? So that’s what matters, really.

Stone: That’s another key point here, right? So US LNG obviously priced at the Henry Hub price — that has been very advantageous for the American exporters up until this point. Is there a risk, going into the future, that US LNG may not remain competitively priced for any reasons that you may foresee?

Corbeau: That is a very interesting and important question, because right now we have seen prices coming down quite a lot, and a couple of months ago, they were actually below 2 dollars per MmBtu, which for gas consumers, that’s fantastic. But for a producer, it’s not particularly great. So some producers have already said, “Whoa, we are agreeing to reduce drilling, et cetera, because we are about making money.” The interesting thing is that, at the same time, we are hearing that power demand in the US is going to increase massively, and that maybe also when you have expansion, it’s not going to be sufficient, so we would need to keep natural gas, which is also displacing coal. So this is to be pointing towards at least a stabilization, and even maybe further increase in natural gas demand in the US. But at the end of this year and probably at the beginning also of next year, we are going to see a certain number of LNG projects in the US starting.

So we could see probably a rebound in prices. And depending on how fast the domestic production is rebounding in the US, where we can see maybe some tension. But in general, the US has been absolutely blessed with very low gas prices, but I don’t think anybody anticipated, even when the first US LNG exports started, or even before. When people were doing analyses about the future, they were looking at prices maybe 4 or 5. The fact is that US gas prices have been very, very low, and probably much lower than what people were anticipating ten years ago. But we are now looking at the next 20, 25 years, if you are taking into account the construction and the length of the contracts. So the big question is: Are US gas prices going to remain in the range of 3 dollars per MmBtu forever after? And that is a particularly important question because, as I mentioned, there are other players which are using a different type of indexation. In particular, Qatar is using oil indexation. So this is a very important element in terms of the competitiveness of US LNG. What you don’t want to happen is that we have all this gas which is coming to the market for a reason — maybe a cold winter for a certain number of weeks, or we have a very hot summer, which is also going to drive our generation demand in the US.

You have gas prices in the US increasing, while at the same time, the price for global gas, global LNG prices are decreasing, and that would be an interesting squeeze, which actually could remind us of what happened in 2020 when the prices of gas, both in Europe and in Asia, those spot prices were so low that it actually triggered a US LNG shutdown.

So we are going to be experiencing a very interesting period going forward. There is a question for the short-term: How is the market going to rebalance? And there is a question for the very long-term: What is the evolution of US gas demand, and to what extent can the US supply base, which is very, very large, indeed, sustain very low prices for a very long period? When I was looking at the latest EIA forecast, they were looking for the first time at a drop of gas demand, but that was before we announced this huge expansion in terms of power demand.

So more and more, those kinds of balances are looking very uncertain in the US.

Stone: As you point out, natural gas demand in the power generation sector in the United States is on the rise, and there’s debate that goes back to the beginning of the first exports out of the Gulf Coast in 2016. The concern was if we export so much of our gas, then it will raise domestic prices. As you said, we’ve been very fortunate. Gas has remained very inexpensive here in the United States. Going forward, that still remains a question.

Corbeau: Remember what happened in 2022. There was an imbalance, and suddenly prices during the summer went to 8 to 9 dollars per MmBtu. And there were people who were saying, “Whoa, this is super expensive for us.” Do we remember the prices in Europe were up to about 15+ at that time, but in the US, people were like, “This is too expensive. We need to maybe constrain a little bit the LNG exports.”

As a European, I was looking at that, thinking, “Oh, well, thank you.” Let’s say for some reason, there is a major drought this summer. Recall demand for power generation, maybe a couple of outages in nuclear power plants, et cetera. You need a lot more natural gas, and prices increase because for some reason, domestic production doesn’t keep up. And let’s say in September, October, the prices are increasing to 8 or 9 dollars per MmBtu, as they did two years ago. What do you think it is going to happen just a month before the elections? That could be interesting.

Stone: Yes. So you mentioned a few minutes ago, Europe and its climate ambitions, and that brings up the next question that I want to ask, which is: In what way do climate concerns potentially impact the future demand for natural gas, and in the context of our conversation, LNG specifically? Is gas seen widely and globally as a bridge fuel, as we may tend to think about it here in the United States or in the EU?

Corbeau: Well, it depends whom you ask. I think if you ask a certain number of people in the EU, given between the net-zero ambitions and some climate concerns, and also given what happened two years ago, they see more gas on the way out, slowly, but eventually on the way out. There might be some gas remaining in 20 years, but definitely much less than now.

If you are asking the same question in Asia, the picture is totally different. They are more concerned about basically economic expansion, having enough energy, and how the price of this energy is going to compare to the price of other energies, namely coal, and also the expansion of renewables. So you are going to get completely different answers. This is why, to come back to the question about how much LNG is really needed, I think the market will be eventually on the way down in Europe, but it’s definitely on the way up in Asia. The question is by how much, and could we eventually see in some countries, countries deproging natural gas and going directly from coal towards renewables. This is not totally impossible, especially because two years ago, LNG was not particularly affordable, and countries have memories. Some countries like Pakistan and Bangladesh, basically found out that LNG was way too expensive for them to afford.

Stone: So why even expose themselves to that market and that risk?

Corbeau: Exactly. And also don’t forget that in many Asian countries, coal is also domestic. So in China, they are a big importer of coal, but a lot of their coal is also domestic. The same way, India. Same way, Indonesia. So there is a different risk involved, and I agree coal prices have also been volatile. And coal is also emitting a lot more CO2 than natural gas. But countries are also looking from different perspectives.

Stone: Let me ask you about the US project, specifically. I’m going to ask you to get in the head of the project developers. I know it’s impossible, but you can probably do it better than anybody else that I know of. How are US project developers justifying their new investments, given all of the uncertainty in the future gas market that we’ve just been talking about? What lens do you think these developers are seeing the world through?

Corbeau: I think they need to do a certain number of things. The first one is to find customers. That’s the first thing that you need to do in order to make a final investment decision, and this is what is going to make the difference between different projects. So you need to find buyers, and if possible, credit-worthy buyers, so that you can actually convince a bank to give you a little bit of money. So that’s the first thing.

Also big advice. You need to have a project which is delivering an LNG which is as clean as possible, or at the lowest carbon intensity as possible. And we are looking here at the relative methane emissions along the value chain. Also, what the project is going to be emitting there. So this is very important. And I think this is also why the Department of Energy hit the pause button. I was not completely surprised they did that because first, the US became the largest LNG exporter. They are planning to double LNG exports, but also there have been all these discussions about new rules on methane emissions in Europe, eventually in other regions which are more and more interested in the carbon intensity of the LNG that they are importing.

So that is very important. I think cleaner energy, because this is on that point, that you are going also to differentiate yourself from your competitor, and this is something that you need to pay attention to.

Stone: In a climate-conscious world, then, cleaner gas would have an advantage in the marketplace, is what you’re saying?

Corbeau: Eventually it would. For sure in Europe, the specificities and the nitty-gritties of the new regulations are still a little bit uncertain, but it will have an impact. I think eventually — right now people are more concerned about the price — but eventually they will start wondering about the carbon intensity. And if you are coming from a place where, “Hey, let’s flare a little bit of gas, and we don’t really care about methane emissions,” and “Oh, yes, my LNG plants, I don’t really care about them. They’re using a lot of natural gas, et cetera, and we have a little bit of leakage here and there.” No, that is going to be for European buyers a very big no-no.

Stone: Okay, so I’m going to push a little further on the question that I asked a couple of minutes ago. In your view, does the market outlook support the number of new projects that are underway, as well as those that are proposed in the United States? How much of this project pipeline is really going to be built, based upon what we’re seeing in the market?

Corbeau: I think some of it may be built, but eventually the question mark ten years from now is in which scenario are we going to be? Are we going to be in the fuller case scenario, which, as you have pointed out, in the case of Shell, is only seeing a 50% increase in terms of LNG trade, or whether, indeed, maybe some things will have changed, and we are going to see a slight peaking of LNG demand in the 2030s.

What I observed, however — two weeks ago, I was comparing all of the net-zero scenarios from different agencies. And I realized one thing, which is kind of interesting. The higher you go by 2030, predicts the higher you are by 2050. So I would say there is probably an advantage of trying to move forward as soon as possible, because you are looking at LNG demand. However, I still maintain that you need to be as clean as possible because otherwise, you might be out eventually.

Stone: Let me ask you a final question here regarding the Department of Energy’s LNG export pause. You’ve already addressed it a little bit, but I want to ask a little bit more here. Do you see a significant change in LNG policy coming out of this, or could the pause even become permanent?

Corbeau: I think that would be a very strong signal if the pause was going to become permanent. My suspicion is that under a Trump administration, I suppose it is going to disappear very soon. Under a Biden administration, I think the secretary has indicated that it would not be that permanent. But again, the most important thing is the project economics and whether they are finding buyers. And this is what is going to determine LNG as a fixture of US energy projects because most projects, with the exception of the good and best projects from Qatar Energy and Exxon need to have LNG contracts. Most of the projects are moving forward with a lot of energy contracts.

Stone: Anne-Sophie, thank you very much for talking.

Corbeau: Thank you very much for the invitation.

Stone: Today’s guest has been Anne-Sophie Corbeau, a global research scholar at the Center on Global Energy Policy at Columbia University.