By Africa Links 24
Published on 2024-02-16 14:18:45
The United States has decided to temporarily halt approvals for new liquefied natural gas (LNG) exports, a move that will have conflicting impacts on African exporters and importers of the commodity. President Biden announced the pause in late January, citing the need for updated environmental analyses for authorizations of LNG exports to non-FTA countries. The administration’s decision includes an exemption for national security reasons, but it was challenged by the Republican-controlled House of Representatives, with their effort not expected to find support in the Democratic-controlled Senate.
While most analysts do not expect the move to cause dramatic price movements in the short-term, a more prolonged ban could potentially limit supply and drive up LNG prices. However, it is important to note that the pause only applies to new projects and will not affect those already under construction. According to Olumide Ajayi, a senior LNG analyst at the London Stock Exchange Group, the pause will not impact the current market situation or supply. However, if new projects were halted indefinitely, this could become an issue in the future.
In terms of implications for African countries, LNG prices have eased in the last year after reaching a peak in August 2022. This decline has been attributed to various factors such as Europe’s mild winters, China’s slow post-COVID economic recovery, and the increase in global supply. Ajayi also notes that Africa has seen several new major projects contributing to supply, such as Mozambique’s FLNG floating LNG unit and Italy’s Eni operating an LNG project in the Republic of the Congo. This has led to an oversupplied market for LNG, but African producers may hope that an enduring US pause on new exports could support higher prices for their own exports in the future. However, more expensive LNG could lead to importers opting for cheaper fossil fuels instead, thus delaying or scrapping further LNG projects in the region.
The US decision to freeze new permits on environmental grounds has added a new dimension to the debate surrounding LNG exploitation in Africa. Some argue that LNG is a transition fuel between fossil fuels and renewable energy, but the pause may provide ammunition for those already skeptical towards the industry and its environmental impact.
In conclusion, the temporary pause on LNG exports from the United States will have both positive and negative implications for African exporters and importers. While it may support higher prices for African exporters in the future, it could also lead to delayed or scrapped LNG projects in the region if importers opt for cheaper fossil fuels. The move adds complexity to the ongoing debate surrounding the environmental impact of LNG exploitation and its role in the transition to renewable energy.
