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

June 01, 2021
Sam Reynolds and Melissa Brown and Tom Sanzillo
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Key Findings

Potential trade and climate policy shifts in the U.S. are raising questions about the viability of several ambitious liquefied natural gas (LNG) projects planned for emerging Asian markets.

Executive Summary

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.”

Sam Reynolds

Sam Reynolds, an energy finance analyst with the Institute for Energy Economics and Financial Analysis (IEEFA), focuses on the economic, financial, and climate risks associated with natural gas and liquefied natural gas (LNG) infrastructure developments in emerging Asia. 

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Melissa Brown

Former Director, Energy Finance Studies, Asia, Melissa Brown, a former securities analyst at JP Morgan and Citigroup, has played a leading role in various Asian investment organizations focused on mainstream and sustainable investment strategies for public and private equity investors over the past 25 years.

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Tom Sanzillo

Tom Sanzillo is Director of Financial Analysis for IEEFA. He has produced influential studies on the oil, gas, petrochemical and coal sectors in the U.S. and internationally, including company and credit analyses, facility development, oil and gas reserves, stock and commodity market analysis, and public and private financial structures. He also examines such areas as community and shareholder activism, institutional investment, public subsidies and Puerto Rico’s energy economics.

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