US LNG Investment Decisions Much Tougher

Remember when US liquified natural gas (LNG) exports were going to save global energy markets and become an infinite money glitch for American exporters? Pepperidge Farms ENERGYminute remembers.

Background: In early 2022, the global economy was red hot. Europeans were scrambling for natural gas, interest rates were low, and it looked like the beginning of a truly epic American LNG boom.

(Narrator’s voice: It wasn’t.)

What happened: Several headwinds showed up: interest rates rose dramatically over the past year, both the economy and banking system turned out to be on shaky ground, and natural gas prices fell. As a result, LNG infrastructure investment decisions are in much murkier territory in early 2023.Two projects – NextDecade’s Rio Grande and Energy Transfer’s Lake Charles – have faced repeated investment delays. Higher construction costs and interest rates are expected to result in higher tolls for customers, reducing project appeal.

But it’s not all bad: The $7.8 billion Plaquemines Phase 2 and the $13 billion Port Arthur Phase 1 projects both won approval.

Zoom out: The US LNG boom is probably not over, but it may finally be succumbing to the thunderous noise of economic doom and gloom. We’ll see if it’s a temporary pause, or a fundamental change.