Is U.S. LNG a Leverage or a Liability?
Tariffs and trade wars politicize U.S. LNG but do not weaponize it
Yesterday, I participated in a panel debate exploring whether U.S. LNG is a leverage or a liability. This question remains highly relevant. Twelve years after co-authoring an op-ed in The Wall Street Journal titled “The Foreign Policy Uses of an Energy Bounty”, the United States is still trying to determine how to engage with the world as a global gas superpower—proud or reluctant, transactional or diplomatic, mercantilist or benevolent.
Despite the transformative impact of the shale gas revolution, no U.S. administration has implemented a coherent and comprehensive energy policy or export strategy. As the Trump administration returns to office, this note outlines the case for the U.S. LNG trade and investments, while addressing key associated concerns.
Downplay Overcapacity Concerns
The fear of overcapacity in the U.S. LNG market may be exaggerated. Regardless of deregulation efforts, market forces will dictate the viability of future investments.
Infrastructure projects currently under construction or proposed face significant challenges, including regulatory delays, rising costs, financing issues, global competition, and insufficient long-term customer commitments.
Although the administration may expedite FERC and DOE licensing, local court challenges remain substantial barriers.
U.S. Energy Exports Contribute to Global Geopolitical Stability
The U.S. government’s 2024 permit export pause benefited rival suppliers. All LNG final investment decisions (FIDs) that year occurred outside the U.S., totaling 31 mtpa from Qatar, UAE, Oman, Canada, and Mexico.
The U.S. gas resource bonanza is a strategic economic and geopolitical asset. Stable OECD gas supplies will be essential as energy transitions progress.
Western nations must choose between supplying their own gas or ceding the market to non-OECD nations. Relying on less transparent suppliers could undermine democratic values.
Given the uncertainty surrounding the timing and volume of low-carbon or zero-carbon energy availability, a “multi-fuel multi-energy hedging” strategy—including natural gas/LNG—is necessary. The name of the game is diversification.
Key Concerns for U.S. LNG Importers
Will the "America First" Agenda and Henry Hub Price Spikes Threaten U.S. LNG Exports? No
U.S. natural gas supply and reserves remain abundant, capable of meeting both domestic and international demand.
By the end of 2027, U.S. production is expected to reach 111 bcf/d, accommodating domestic consumption (~84 bcf/d), pipeline exports (~10 bcf/d), and LNG exports (~17 bcf/d).
The primary constraint on U.S. gas production has been low Henry Hub prices. However, higher prices and additional pipeline infrastructure are projected to drive production growth, ensuring robust export capacity.
U.S. LNG producers remain committed to reducing methane emissions and ensuring “green LNG” competitiveness in Europe and Asia, despite potential regulatory shifts.
Is Europe Replacing Its Russian Gas Dependency with an American Dependency? No
Europe has effectively diversified its energy sources. Norway currently supplies 31% of imports, followed by the U.S. (20%), Russia (18%), and Algeria (15%).
Dependency on U.S. LNG fundamentally differs from reliance on Russian gas, as U.S. LNG is provided by diverse private-sector entities, including merchants, European-owned companies and Japanese trading houses.
Political risks associated with U.S. LNG remain minimal compared to the weaponization of Russian gas. Tariffs and trade wars politicize U.S. LNG but do not weaponize it.