US LNG permit freeze sparks export boom in Canada and Mexico

Canada and Mexico are rushing to fill the natural gas void left by the ongoing US moratorium on new liquefied natural gas (LNG) export permits introduced by the Biden Administration in January of this year. The country’s northern and southern neighbors are ramping up their own export capacities to the tune of tens of billions of dollars to capitalize on the new market opportunity to supply natural gas to Asian buyers as the world’s biggest LNG exporter takes a break.

On January 26, President Biden announced that he would do so pause approvals of new licenses to export LNG, so the US Department of Energy needs time review and evaluation whether the nation’s sizeable LNG exports “undermine domestic energy security, raise costs for consumers and harm the environment.”

Canada, in turn, he wasted no time at all rushing to fill the considerable void left by the United States. According to figures from Rystad Energy AS, Mexico and Canada have around $63 billion in capital investment to supercharge their respective LNG export capacities. “(Customers) want alternative suppliers,” Kenny Stein, vice president for policy at the Energy Research Institute, said recently Financial Times. “They are happy to have more supply in the market from suppliers outside the US.”

From a climate perspective, increased LNG exports from Canada and Mexico are a hugely welcome addition to global markets, especially for Asian buyers – although they alone will not be able to provide the volumes of LNG needed to move Asia away from coal. “Massive volumes of coal need to be replaced in the 2030s and beyond in emerging Asia to achieve the region’s net-zero aspirations. This will inevitably mean substantial gas imports,” Nikkei Asia reported at the beginning of this year. “As the only realistic alternative to coal in terms of affordability and energy density, U.S. LNG offers a much cleaner option for always-on power generation that, in partnership with renewables, can meet growing energy demand while facilitating time climate progress”, the report. continue.

Despite their relatively smaller export capacities, Canada and Mexico may have critical strategic advantages over US suppliers that allow them to export LNG to Asian markets more efficiently. The two countries plan to significantly build their LNG export infrastructure on the Pacific coasts, allowing them to avoid shipping LNG through the Panama Canal. This could give Canada and Mexico a key advantage in the LNG markets as the Canal became one the global choke point for LNG trade in recent years. Exporting directly from the West Coast “would give (Canada and Mexico) easier and potentially cheaper access to Asian markets, which the industry is expected to boost growth,” according to the Financial Times report.

And Canada and Mexico aren’t the only ones rushing to capitalize on Asian buyer demand for new LNG sources. A floating natural gas project off the coast of Argentina could soon emerge as a new supplier to eastern markets, like BP’s Pan American Energy. seeks to negotiate contracts with Asian consumers. Pan American is just one of many companies aiming to turn Argentina into a major player in the global oil and gas markets. Notably, YPF, Petronas and Tecpetrol are all working on major projects in South America, which sits atop the world’s second-largest shale gas reserves. Argentina is currently one of four countries producing shale gas on a commercial scale, along with the US, Canada and China.

This means that when the United States ends its permit freeze, the market will change significantly. LNG exporters should prepare for a much higher level of competition from American LNG exporters, which could have key logistical advantages over US businesses.

By Haley Zaremba for Oilprice.com

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