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ENB Pub Note: This is an excellent article from Bloomberg on LNG diplomacy and the expansion in President Trump’s second term. We are going to see some critical changes in the geopolitical world and new alliances that will not be directed by the globalists. Energy and Finance will be at the core of the realignment coming around the corner. A Key export for President Trump’s rebalancing of trade. Just look at Japan and its willingness to jump on long-term contracts for LNG.
Ripping up old alliances and turning the post-World War II axis on its head would have been impossible for any previous American president because of the insatiable US thirst for imported energy. But the Trump White House is able to lean on an increasingly critical made-in-America commodity to exert new levels of geopolitical leverage: liquefied natural gas.
The US, which in the span of about seven years transformed itself from an irrelevant supplier of LNG into the world’s largest, is set to expand its production capacity by 60% in the first half of Donald Trump’s second presidency, according to an estimate from BloombergNEF. By the end of the decade, almost 1 in every 3 tankers carrying the superchilled fuel will originate in the US, giving Trump his best chance to attain the energy dominance his campaign promised.
Trump frequently talks of his plans to ramp up America’s production of “liquid gold,” the fracked oil he accused President Joe Biden of holding back out of concern about climate change. But US crude production will grow by only about 2.9% this year as the shale industry waits to tap future drilling locations. The Permian, the country’s biggest oil basin, could reach peak production as soon as 2028, the last full year of Trump’s presidency, before plateauing, according to S&P Global. Likewise, Secretary of the Treasury Scott Bessent’s pledge to increase oil production by 3 million barrels a day as part of his “3-3-3” plan to boost the economy—which also includes getting the fiscal deficit down to 3% of gross domestic product and sustaining growth at 3%—is only likely to be achieved if measured in barrels of so-called oil equivalent, which includes gas, says Raoul LeBlanc, an analyst at S&P Global.
Oil “is probably not going to grow meaningfully in the short run,” Energy Secretary Chris Wright said in an interview with Bloomberg TV in February. US gas production, on the other hand, is going to grow “dramatically” in the next two or three years, he said. Or, as Vice President JD Vance put it while on the campaign trail in Pennsylvania: “We’re sitting on the Saudi Arabia of natural gas. We’ve just got to unleash that.” It’s an exciting prospect for the world’s top oil and gas executives and government officials, who’ll gather for the CERAWeek by S&P Global conference in Houston starting March 10.
Twenty years ago, the idea that natural gas would play an even more important role than crude oil in US diplomatic calculations would have been preposterous. At the turn of the millennium, the US was short of gas. It generated less than 15% of the country’s power, outflanked by nuclear and coal, and Federal Reserve Chairman Alan Greenspan called for a major expansion of imports to address the shortfall in domestic supply. Horizontal drilling and hydraulic fracturing, or fracking, which picked up in the early aughts, changed all that. The two techniques unlocked previously inaccessible oil and gas reserves from North Dakota to New Mexico. The US more than doubled its natural gas production, to more than 100 billion cubic feet per day, and it now fuels 41% of the country’s electricity.
In fact, shale gas supplies rose so quickly during the past 20 years that it far outpaced domestic demand, prompting a decade-long malaise in prices that hurt producer profits. The industry looked for more ways to deploy its gas, including by building plastics-making petrochemical plants along the Gulf Coast. But the Holy Grail is to export it, especially because international customers are willing to pay higher prices. Europe needs a long-term replacement for Russian supplies, Asia needs fuel for its fast-growing economies, and the developed world needs more energy to satisfy the demand from data centers powering artificial intelligence.
An expanding number of companies, including Cheniere Energy Inc. and Venture Global Inc., have raced to build multibillion-dollar liquefaction facilities to help them serve the overseas market. The complex plants can chill natural gas to -256F (-160C), transforming it into a liquid state that specialized ships then transport overseas, where it’s regasified. Eight of these sites are already operating in the US, with three more under construction and several others close to deciding whether to move forward with final investment. Trump is also trying to breathe life into a long-stalled LNG project in Alaska.
Although no friend of the oil and gas industry, Biden advanced the LNG agenda set in Trump’s first term after Russia invaded Ukraine in 2022. US supplies to Europe could replace the gas the continent piped in from Russia, helping to deprive President Vladimir Putin’s “war machine,” he said. The Netherlands, France and the UK quickly became the biggest buyers of American LNG. European Commission President Ursula von der Leyen praised Biden for being a “reliable” partner and said the trans-Atlantic relationship was “stronger and more united than ever.”
Once seen as a transition fuel to help wean the world off coal as it moves toward clean renewables, natural gas has surprisingly endured. That could have dire consequences for combating climate change, which requires reductions in all fossil fuels, including natural gas, if the world is to reach net-zero emissions by 2050. “All the talk was that natural gas was a bridge fuel,” says Mike Sommers, chief executive officer of the American Petroleum Institute, which lobbies for the oil and gas industry. “It’s clear now that natural gas is the future fuel.”
US natural gas prices have averaged $3.55 per million British thermal units over the past five years, about 70% lower than the European average, providing the economy with a major competitive advantage and helping to underpin both Biden and Trump’s policies to bring US manufacturing back from overseas. “Energy is the foundation for every economy, so the fact that US can supply itself cheaply and increasingly export to the rest of the world is a huge advantage,” says Arjun Murti, a partner at Veriten, a Houston-based energy research and advisory firm. Europe by contrast has seen “a big deindustrialization trend,” particularly in Germany.
The US gas industry’s meteoric growth hit a roadblock in the final year of Biden’s presidency, when his administration put a moratorium on new LNG export licenses while it scrutinized the effect on climate change. Trump lifted the pause on his first day in office, with no mention of the climate concerns that prompted Biden to halt approvals. (Also unmentioned was a phrase Trump’s previous Energy Department unsuccessfully tried to coin in 2019 to promote American LNG over supplies from Russia or the Middle East: “freedom gas.”)
The country’s expansion in gas production and exports stands in stark contrast to the state of the US oil industry. Although it’s the world’s largest, it doesn’t provide Trump with the geopolitical heft enjoyed by OPEC and its de facto leader, Saudi Arabia’s Mohammed bin Salman. While America currently pumps about 13.5 million barrels a day, about 50% more than Saudi Arabia, growth prospects are limited: Low oil prices force producers to reduce costs and preserve what’s left of their runway of future drilling locations. But if America’s natural gas industry continues to grow as expected, this slow growth may not matter.
Europe, for now dependent on the US for gas, has little room to maneuver. Even as Ukraine fumes over Trump’s apparent sympathy for Putin, its largest private energy company is in talks with US sellers over a two-year LNG supply contract. Under threat from major US tariff hikes, Indian Prime Minister Narendra Modi pledged to facilitate imports. Japan, South Korea and Taiwan are considering purchasing more American LNG to head off Trump’s tariffs and reduce their trade surplus with the world’s biggest economy.
Trump’s strategy also carries the danger of pushing some key buyers away. China, last year’s biggest LNG importer, in February slapped retaliatory tariffs on American gas in response to additional US tariffs. And that’s not the only risk. With so many new US plants coming online, analysts expect the market to be oversupplied by the end of the decade, which could cause prices to drop. Even so, LNG is typically more expensive than coal and not as clean as renewables. And, as China has shown, both of these other fuel sources can often be produced domestically without having to rely on imports.
“No government wants to be dependent on import markets unless they have no choice,” says Myers Jaffe, the NYU professor. For the next two years or so, countries may have no choice, she says. “But we’re at such a transformative period for energy, 10 years from now there will be a choice. The window for US natural gas is not infinite.” —With Stephen Stapczynski
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