New policy and market risks for U.S. LNG project sponsors in Emerging Asia

The United States natural gas industry faces mounting financial and market challenges, both at home and abroad. The outbreak of COVID-19 exposed the underlying financial vulnerability of the U.S. oil and gas industry, causing drill rig counts to plummet and pushing bankruptcies to their highest level since 2016.

Looking ahead, the Biden administration’s plans to decarbonize the power sector by 2035, regulate the climate impacts of natural gas infrastructure, and accelerate deployment of clean energy technologies could limit domestic natural gas demand growth.

U.S. natural gas players have relied increasingly on liquefied natural gas (LNG) exports to fill gaps in domestic demand, but export growth is also becoming more challenging. In Europe, prospects for gas imports—once viewed as a transition fuel to low-carbon energy sources—have faltered as European governments adopt aggressive government climate targets. Meanwhile, the falling cost of renewables threatens gas demand in Europe’s power sector. Together, these trends have led many analysts to conclude that the continent’s LNG ambitions have already peaked; as the president of the European Investment Bank recently declared: “To put it mildly, gas is over.”