The Biden administration promises US LNG for Europe. How it works?

On March 25, 2022, President Joe Biden announced an agreement committing the US liquefied natural gas (LNG) industry to supply an additional 15 billion cubic meters (bcm) of LNG to Europe during the remainder of the year. The agreement also envisages increasing the supply of LNG from the United States to Europe to 50 billion cubic meters until 2030, which is equivalent to approximately one third of the European Union (EU) gas imports from Russia in 2021. Interestingly, although welcomed by European allies and the US LNG industry, the announcement may never have been discussed with the industry. One of the main American LNG players, Charif Souki, the head of developer Tellurian, said The New York Times, “I have no idea how they’re going to do this, but I don’t want to criticize them, because for the first time they’re trying to do the right thing.” The question now is how will the US government, in a free market, order commercially independent companies to ship LNG to Europe?


The US LNG industry emerged in 2016 when Cheniere became the first company export LNG to the world market. Today, the United States is one of the world’s top three producers of LNG and in the process of becoming the first supplier later this year, overtaking LNG export giants Qatar and Australia. The US LNG industry has grown by reshaping the conventional LNG sector with a focus on commercialization. The industry has been compartmentalized with companies focusing on liquefaction and selling products, leaving upstream resource development and the middle of the pipeline to others. The development and construction of liquefaction plants are now commonplace.

Commercially, US LNG project developers have sold their product primarily to portfolio players, such as Shell, BP, Total, Trafigura and Vitol, as well as to the Asian market, retaining little volume of Non-contractual LNG for sale on the spot market. Long-term contracts with high-credit buyers were necessary to support project financing. With few non-contractual reserve LNG volumes and long-term contracts, project developers have little flexibility to direct material volumes to the European market today.

Existing North American LNG export terminals

Source: Federal Energy Regulatory Commission (FERC)to September 17, 2020
  1. Kenai, AK: 0.2 Bcfd (Trans-Foreland)
  2. Sabine, LA: 3.5 Bcf/d (Chênière/Sabine Pass LNG – Trains 1-5)
  3. Cove Point, MD: 0.82 Bcf/d (Dominion–Cove Point LNG)
  4. Corpus Christi, TX: 1.44 Bcf/d (Chênière –Corpus Christi LNG trains 1, 2)
  5. Hackberry, LA: 2.15 Bcf/d (Sempra–Cameron LNG, Trains 1-3)
  6. Elba Island, Georgia: 350 MMcfd (Southern LNG Units 1-10)
  7. Freeport, TX: 2.13 Bcfd (Freeport LNG development/Freeport LNG expansion/FLNG 1-3 liquefaction trains)

Looking ahead: LNG sellers

The US LNG sector is poised for more growth with several projects in development and others in the construction phase. At least six projects are expected to make the final investment decision (FID) in 2022. If this happened, the United States would add a minimum of 84.0 million tonnes per annum (Mtpa) by 2026. However, the reality is that many projects will not reach FID due to uncertainty of project execution and lack of off-take agreements. In fact, it is likely that only 25% (21.7 Mtpy) of the planned 84.0 Mtpy will materialize in time to deliver LNG to the European market by 2026.

The two main challenges faced by projects are project execution, which determines the cost of the project, and off-take agreements, which generate revenue for the project. The combination of costs and revenues determines the economic return. Project execution relies on supply chain management, including equipment, materials and craft resources. All three categories are currently experiencing challenges, shortages and pressures that are driving up project costs and threatening delivery dates. While LNG prices are currently high, long-term pricing anchors revenue and long-term prices are below current spot prices. As such, the economics of the project are in question.

The queue for LNG projects in the United States is long, with projects in various stages of development. The new projects have not obtained offtake agreements for 100% of the LNG volume, which implies that certain volumes are still “for sale” to European buyers. Two major projects currently under construction, Qatar Energy/ExxonMobil LNG Golden Pass (first LNG 2024) in Southeast Texas and the Shell-led LNG Canada (first LNG 2024) in British Columbia, took FID without contracting their LNG volumes. Instead, the parties have committed to integrating LNG volumes into their portfolio. The two projects will supply more than 29.0 Mtpy to the market and will offer the European market much-needed LNG in the short term, provided, of course, that buyers and sellers reach a commercial agreement on the price of sale, the contractual conditions and the duration.

So far, 29.0 Mtpa will come to market from the two projects under construction (Golden Pass LNG and LNG Canada), and an additional 21.7 Mtpa by 2025 from projects that have a reasonable chance of reaching FID in 2022. This equates to approximately 50.7 Mtpa. Mtpy of new LNG volumes expected to enter the market by 2025. Of this total, 29.0 Mtpy were not under contract to the FID project. The contracted volumes and buyers of the 21.7 Mtpa to be delivered from projects expected to reach FID in 2022 are unknown. This suggests that significant volumes of North American LNG should be available to European buyers for delivery by the middle of this decade. An additional 62.0 Mtpy may eventually mature; however, these projects face significant business challenges. Reaching FID in 2022 may not happen, thus delaying the first LNG dates to the late 2020s, assuming they reach FID at all.

American LNG developers are also trying to decipher the Biden administration’s energy strategy. With initial efforts focused on limiting all hydrocarbon-based project development, the industry has prepared for the challenges of permit approvals, project sanctioning and changes to operating regulations. Over the past month, however, the administration has publicly offered US LNG to Europe, but continues to limit allowed in advance. As LNG plants in the United States expand, additional gas resources will be needed. Thus, upstream permits will be essential to the long-term growth of LNG supply in the United States.

Looking ahead: LNG buyers

The market must absorb any additional volume of American LNG. Given that the Biden administration has said increased volumes will go to the European market, one has to wonder where the LNG buyers are. As noted, long-term contract pricing must support sufficient economic returns for project developers, and US LNG supply will compete with planned new LNG supply from Qatar, which will likely have a lower cost base. . Portfolio buyers will continue to accept LNG at competitive prices, as will buyers of conventional Asian light rail lines. European buyers will have to compete for volumes, and US LNG will have to compete for buyers.

Several project promoters have expressed concern about the long-term nature of the European market. While European buyers have recently attended US LNG industry events, the EU lacks a coherent view. Some countries have expressed concern about greenhouse gas emissions and the carbon footprint of new LNG volumes. Others have commented that stopping Russian pipeline gas supply will actually reduce greenhouse gas emissions from leaking pipelines. Project developers fear that the EU will seek US LNG during the Ukraine crisis, but does not want long-term LNG supply, opting to revert to “greener” options once the crisis subsides and leaving suppliers of American LNG contracts of short duration. US LNG suppliers are wondering if this is just a temporary change or if the EU is going back to gas and slowing down its green energy strategy. Smarter and possibly smaller (3-5 Mtpa) LNG projects that require two to three offtake contracts to achieve FID may have a competitive advantage over conventional large-scale LNG projects (10-12 Mtpa ), which require large offtake volumes (7-10 Mtpy) contracted to secure the FID and take longer to build.


A window of opportunity exists for developers of LNG projects in the United States. The Biden administration’s promise to deliver more US LNG to Europe will require an increase in LNG export capacity. Companies that have a site, a solid feed gas supply strategy, federal and state permits in hand, and an engineering, procurement, and construction contract ready for execution can act quickly to secure the first LNG delivery before the 2030 deadline. The US LNG project portfolio can deliver additional LNG volumes to Europe by 2030, but these project developers must project delivery/first LNG dates before 2030 and secure off-take contracts with European buyers.

Until the mid-2020s, European buyers will need to secure LNG supply from the global spot market, Asian customers who may be long in supply, wallet players and US LNG suppliers with minimal reserve volumes . While the Biden administration’s announcement is positive for the industry, many steps need to be taken before the promised LNG volumes materialize.

Wayne Ackerman has over 30 years of experience in the upstream exploration and production industry and in the development of major capital projects, including LNG. He is also Founder and President of Ackerman and Associates Global Consulting, LLC, and a member of the MEI Economics and Energy Program Advisory Board. The opinions expressed in this article are his own.

For more details on LNG export terminals approved but not yet built and proposed, please see the complete set of FERC LNG export cards.

Photo by Mark Felix/Bloomberg via Getty Images