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The Future Of U.S. LNG Hangs In The Balance

Soaring American exports of liquefied natural gas (LNG) could become a powerful tool of the Biden Administration to help other countries reduce their carbon footprint from more emission-intensive fossil fuels such as coal, U.S. shale gas producers say.   

Moreover, “American natural gas is the sharpest diplomatic tool the Biden administration can wield in energy-related foreign policy and international trade negotiations,” David Callahan, president of the Pittsburgh-based Marcellus Shale Coalition, wrote in InsideSources.com this week. 

However, the Biden Administration doesn’t yet have a precise position on natural gas, especially with regards to the domestic energy mix in light of the climate agenda and the ambitions to have 100 percent clean electricity by 2035. 

U.S. Secretary of Energy Jennifer Granholm said last week, “We need to get to 100% clean electricity by 2035,” acknowledging this is a very ambitious goal. 

Just for reference, natural gas accounted for the largest share of U.S. utility-scale electricity generation in 2020, at 40.3 percent, with fossil fuels at 60.3 percent share, also due to coal’s 19.3-percent share of the power mix. 

Despite the growing global backlash against natural gas and despite its clean energy agenda, the Administration may have to forgo a tough stance on gas, at least in the short and medium-term, with the narrative that American LNG is helping major coal-dependent energy consumers such as China and India to burn a fossil fuel that is cleaner than coal.   

In energy-related foreign policy, the Biden Administration is following the Trump Administration’s tough stance toward the Russia-led Nord Stream 2. It has reiterated threats of U.S. sanctions on companies helping Russian giant Gazprom to complete the controversial natural gas pipeline in Europe. 

Related Video: Saudi Arabia Goes All-In on Hydrogen

American LNG is gaining ground in Eastern European countries like Poland and Lithuania. Those countries are eager to shake off Russia’s dominance over their natural gas supply - and the political clout that comes with it.  But Western Europe has started to have second thoughts about imports of U.S. LNG due to the emissions associated with shale gas production. This could potentially undermine the LNG-related diplomacy in western European countries. 

In Asia, the world’s main gas demand growth driver, U.S. exports of LNG have been soaring, according to EIA data, and could contribute to the coal-to-gas switch in China and India.  

Secretary Granholm said during a confirmation hearing at the Senate Committee on Energy and Natural Resources:

“I believe U.S. LNG exports can have an important role to play in reducing international consumption of fuels that have greater contribution to greenhouse gas emissions.” 

She also noted that “If confirmed as Secretary, I also look forward to working with U.S. industry in ways to reduce emissions associated with this commodity.” 

The emissions associated with LNG exports have started to become an issue for some buyers, such as France’s utility Engie, which at the end of last year backed out of talks surrounding a long-term U.S. LNG supply deal due to the emissions problem. 

Gas demand in China and India is set to continue to increase and offer a growing export market for U.S. LNG exports. Still, in Europe, the green agendas are complicating the role of the fuel in the future. 

“Clean energy cannot yet be deployed on the scale needed, fossil gas may still play a role in the transition from coal to zero emission electricity. But I want to be crystal clear with you – fossil fuels have no viable future. That also goes for fossil gas, in the longer run,” Frans Timmermans, Executive Vice-President for the European Green Deal, said last week.

Related: Will 2021 Mark The Start Of A Major Shale Recovery?

The global outlook for gas demand is more robust than that for oil, primarily due to Asian demand. 

But in view of the climate agendas and energy transition in developed economies, “Gas players will have to show commitments to decarbonize natural gas, including through carbon capture, utilization and storage (CCUS) and blue hydrogen,” Wood Mackenzie vice president Massimo Di Odoardo said.  

U.S. shale gas has a high carbon footprint, and that’s the Achilles heel of American LNG supply, according to WoodMac’s Director of LNG, Giles Farrer.

“We’re starting to see US producers change behavior, stopping routine flaring and setting targets to reduce methane leakage. But it’ll take years of tighter control – regulation or industry-led – before US upstream gas competes on carbon intensity with global basins,” Farrer said. 

America is one of the top three LNG exporters in the world, after Qatar and Australia, but the future of U.S. LNG sales could now depend not only on surging Asian demand but also on buyers’ demand for low-emission cargoes. 

By Tsvetana Paraskova for Oilprice.com

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  • Bill Simpson on April 03 2021 said:
    All clean electricity by 2035, I want to see that happen. What do they expect, fusion to finally be up and running smoothly by then? 340,000,000 Americans to decide to shut off their air conditioners, heaters, refrigerators, and sell all their energy guzzling useless bitcoins? A few hundred new nuclear power plants to magically appear in Canada and Mexico, with the electricity sent to the USA? Better get going really soon on those nukes, if they plan on very many being operational inside the USA by 2035, because they are not an easy thing to build.
    They might want to note that electric cars consume a huge amount of electric power. So those clean electric cars they want us to all drive, will mean that significantly more electric power will need to be generated, than is generated today. Millions of cars consume a lot of energy, now coming from gasoline. I am not smart enough to figure out how much electricity it would take to replace all that energy now coming from millions of barrels of oil daily, but I bet it would be a whole lot of electricity. And unlike gasoline, diesel, natural gas, or coal, you can not store much electricity, without many trillions of dollars of new investment in something. Exactly how that might be done, nobody has yet figured out. Maybe there is a secret plan to take over Canada, and flood much of it for pumped hydro storage. Do not tell anybody, just in case.
    Maybe they have a secret, new vastly cheaper battery technology they plan to roll out soon. That way, when the sun is not shining, which happens to be over 50% of the time during the winter months in North America, they can store all that solar power until the next time the solar panels are producing all that electricity. The Chinese will look forward to selling Uncle Sam billions of solar panels. That should help the balance of trade, for sure. Or they can make the panels in the USA, at probably double the cost. Maybe India will start cranking out millions of cheap solar panels, and selling most of them the the USA.
    Maybe a couple million new wind turbines will get the job done. Constantly replacing them, after they start to wear out, will employ a lot of people. Too bad we can not control if, or where, the wind blows, at least, not yet.
    I wonder what good a clean grid is in the USA, if Asia, Africa, and South America are still burning coal and natural gas to generate power? Has Biden discovered a way to stop air from circulating around the planet, so that the USA becomes an island of clean, cool air?
    Maybe green hydrogen is the answer. Oh wait, it takes a lot of electricity to split a strongly bonded water molecule into oxygen and hydrogen atoms. Never mind.
    So they had better get going with high altitude weather modification experiments, because that is probably the only hope to stop catastrophic climate change. The rapid transfer away from fossil fuel use can never work. And even if we could find some way to soon quit consuming fossil fuels, it is probably already way too late to stop the warming that is already coming from putting trillions of tons of additional greenhouse gas into the atmosphere during the last hundred years. We will need some solar shielding, until the global population begins diminishing during the next century. Unless they do that, the second half of this century will see misery on a scale not witnessed since the bubonic plague.

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