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Tuesday, May 28, 2024
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The Liquid Natural Gas Pause

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The United States is the leading exporter of LNG, and the market has been expanding significantly in Europe and Asia. When Russia invaded Ukraine, the dangerous dependency of Europe on Russian natural gas became abundantly obvious. One of the projects affected by the permit pause is already committed to supply natural gas to Germany. Image for illustration purposes
The United States is the leading exporter of LNG, and the market has been expanding significantly in Europe and Asia. When Russia invaded Ukraine, the dangerous dependency of Europe on Russian natural gas became abundantly obvious. One of the projects affected by the permit pause is already committed to supply natural gas to Germany. Image for illustration purposes
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Dr. M. Ray Perryman President and Chief Executive Officer of The Perryman Group

A moratorium was recently issued on permits for new liquefied natural gas (LNG) facilities. Although the reasons were purportedly related to climate change, the reality is that slowing the development of this market is actually deleterious for the environment, not to mention the global economy, human sustainability, and geopolitical stability. 

The United States is the leading exporter of LNG, and the market has been expanding significantly in Europe and Asia. When Russia invaded Ukraine, the dangerous dependency of Europe on Russian natural gas became abundantly obvious. One of the projects affected by the permit pause is already committed to supply natural gas to Germany. 

This order doesn’t affect projects already operational, under construction, or permitted. Its near-term effects are, thus, minimal (assuming it only persists through the election). By slowing the development of the market, however, the moratorium prolongs Russia’s power (and access to funds) at a time when tensions are high. It also increases the investment risk and uncertainty associated with future development of an essential resource.

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Climate change must be addressed, but pausing LNG permits has the opposite effect. A key reason that the United States has reduced carbon emissions in a growing economy is the transition from coal to natural gas. In fact, a study from the National Energy Technology Laboratory found that, even when production, liquefaction, transportation, and regassification are included, the end result of using LNG is lower emissions than for regional coal in Europe or Asia. Moreover, US gas burns cleaner than Russian gas. 

Renewable energy, while critical, cannot provide sufficient reliable power 24/7 at present, and studies by the Department of Energy (and many others) clearly indicate that meeting future demand for energy is going to necessitate an all-of-the-above strategy for the foreseeable future. We certainly must ensure that oil and natural gas exploration, development, and deployment occur in a responsible manner. However, when the practical alternative is to burn coal or dirtier natural gas from Russia, American LNG is far preferable for the environment (and geopolitical stability). 

In 2015, 190 countries in the United Nations adopted an initiative to dramatically reduce emissions and eliminate extreme poverty in the world by 2030. We are nowhere close to these objectives. Unless we want to consign billions of people to freezing cold and inhumane suffering, we must develop domestic natural gas resources and maintain access to markets around the world. 

Slowing these projects just as momentum is surging is a shortsighted policy which will be counterproductive to addressing the climate crises, achieving greater global stability, and improving the human condition. Addressing these existential issues requires a vision that is measured in generations, not election cycles. This is NOT a pause that refreshes. Stay safe!

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Dr. M. Ray Perryman is President and Chief Executive Officer of The Perryman Group (www.perrymangroup.com), which has served the needs of over 3,000 clients over the past four decades.

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