DIPLOCRAFT: THE FUTURE OF AMERICAN LNG ENERGY LEADERSHIP

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Thursday, April 4, 2024

On Thursday, April 4, Meridian hosted “The Future of American LNG Energy Leadership,” the latest installment of the Center for Diplomatic Engagement’s Diplocraft series. On the heels of the Biden Administration’s recent pause on pending approvals of liquified natural gas (LNG) exports, this bipartisan, cross-sectoral dialogue explored U.S. LNG policies and the challenges associated with balancing environmental protection, energy security, and global energy demand.  

The discussion built on the 2021 Meridian program, Just Energy: In Pursuit of a Fair Global Energy Transition Balance. The program featured a fireside chat featuring The Honorable Marc Veasey (Congressman, TX-33), as well as a distinguished panel including: 

• Paul Everingham, Chief Executive Officer, Asia Natural Gas & Energy Association 
• Ana Maria Jaller-Makarewicz, Lead Energy Analyst, Europe, Institute for Energy Economics and Financial Analysis 
• Leslie Palti-Guzman, Head of Research and Market Intelligence, SynMax 

Ruth Liao (Reporter, Bloomberg) moderated the program and Natalie Jones (Executive Vice President, Meridian) delivered introductory remarks.  

Here are some­ top takeaways from the program:

1. A Contentious Policy Shift

The Biden Administration recently announced a temporary pause on new federal oil and gas leases, including liquified natural gas (LNG) projects, as part of their efforts to combat climate change. The pause aims to review the leasing program’s environmental impact and ensure it aligns with the administration’s climate goals, while also signaling a shift towards cleaner energy sources and demonstrating the administration’s commitment to reducing greenhouse gas emissions. Critics argue this could negatively impact domestic energy production and economic growth while proponents view it as a necessary step towards a more sustainable future. As one of nine Democrats who voted with Republicans in the U.S. House of Representatives to reverse President Biden’s LNG pause, Congressman Marc Veasey spoke about the vital role that LNG plays within American energy infrastructure, sharing “the United States continues to lead in global stability and energy resources, the export of U.S. LNG is a linchpin for fostering strong international partnerships, diversifying energy supplies, and reducing dependence on volatile regions,” in his letter to President Biden. Partisan politics are also at play, with House Speaker Mike Johnson (LA-4) conditioning Ukraine aid on the reversal of President Biden’s LNG pause.  

2. Forecasting the Future

Although the LNG pause may not cause supply shocks in the short term, there is disagreement about the anticipated mid- and long-term effects. Experts primarily agree that the short-term energy supply in Europe and Asia will likely be unaffected; however, energy stability may be strained due to weather related complications and shifts in trading partnerships. The sensitivity surrounding LNG imports, according to Paul Everingham, becomes timelier during the winter months as energy use increases and supply can potentially be under strain, particularly from Russia. Everingham emphasized the pause also creates increased levels of risk to longer-term development projects in Asia, particularly for South and Southeast Asia, where “...over the next 5 to 20 years, a lot of South and Southeast Asia will also become energy import dependent,” adding concern as to whether the “U.S. will play that guarantor of energy security in the Asia Pacific.” Leslie Palti Gutzman shared concerns that in the “medium term and longer term, it will have consequences if it goes beyond eight to 12 months because the importers are not going to wait.” By contrast, March 2024 saw record levels of European energy storage, alongside renewable based power generation increasing. Ana Maria Jaller-Makarewicz contends that “there is enough LNG supply to count on,” and based on current energy import numbers, there is little cause for concern in the short and medium term.

3. The Importance of a Diversified Energy Portfolio

A diversified energy portfolio, encompassing both LNG and investments in sustainable technologies and renewable energy sources, emerges as a critical strategy in addressing energy security while advancing the green energy transition. Congressman Veasey emphasized the interconnected nature of energy security and renewable energy development, asserting, "we absolutely cannot have a more renewable energy future without addressing these concerns around energy security.” He cautioned against neglecting energy security in favor of renewable energy initiatives, warning that such an approach would be "woefully wrong."  Veasey also highlighted the risk of falling behind China and Russia in renewable innovation if the U.S. remains overly reliant on fossil fuels. Moreover, the LNG pause introduces risks of importers reverting to nonrenewable forms of energy, especially coal, in regions where renewable energy infrastructure is not readily deployable, particularly in emerging markets like South and Southeast Asia. Everingham emphasized that while established LNG-importing countries like Japan and Korea may seek alternative suppliers like Qatar, others such as Vietnam and the Philippines could resort to coal-fired power generation in the absence of affordable and readily available gas. Jaller-Makarewicz's analysis reinforced the significance of renewable energy investments in shaping Europe's energy landscape. Europe's push towards renewables, with 30% of energy coming from Norway, underscores the importance of a balanced approach to energy security that integrates both LNG and sustainable alternatives.

4. WHO Exports LNG Matters

Emerging from the discussion on LNG exports remains the significant consideration of the source of supply and its geopolitical implications. While the LNG pause has notably halted U.S. exports, Palti-Guzman emphasized the preference of importers to rely on the U.S. as a democratic, OECD exporter. Critics contend the pause opens the door for adversaries such as Russia and Qatar to increase their LNG exports and for other nations to increase dependencies on them. Russia currently accounts for 15% of Europe’s energy supply, with Belgium, France and Spain continuing to import most of their LNG supply from Russia. Everingham articulated the potential for Russia to also establish trading relationships with South and Southeast Asian nations. In response to Russia’s invasion of Ukraine and other geopolitical tensions, Jaller-Makarewicz notes Europe has made concerted efforts to insulate its energy supply chains and further investments in renewable energy sources to move away from their dependence on geopolitical risk factors with alternative exporters.

5. Sending Mixed Signals

The discussion on LNG exports sheds light on the complex interplay between energy security, economic interests, and global geopolitics. Everingham raised the need for transparency and consistency in U.S. energy policy decisions to avoid confusing allies and jeopardizing strategic alliances. America has pushed for allied countries to increase production of critical materials like steel, aluminum, and silicone chips over the last four years to drive dependency away from China. However, this strategy risks inadvertently steering allies towards nonrenewable energy sources like coal or gas, as renewable energy may not yet meet the high-temperature requirements for manufacturing. Congressman Veasey also noted the correlation between energy production and the immigrant workforce in America. Immigration labor and policy reform are crucial for the U.S. energy sector to fill workforce gaps and foster innovation. He argued that “[the U.S.] cannot continue to be the leaders that [they] are on energy without having a comprehensive immigration reform package eventually passed through Congress.” The inability for policymakers in the U.S. to form a consensus on comprehensive immigration reform furthers the mixed signals coming out of Washington on these priorities. This multifaceted conversation underscored the delicate balance between national interests, global energy markets, and geopolitical considerations in formulating effective, holistic strategies.