Biden decision will ‘erode confidence’ in LNG industry, Shell CEO says

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Top oil industry executives have hit out at US President Joe Biden’s decision to pause approvals for new liquefied natural gas export terminals, with Shell’s CEO warning it will “erode confidence” in an industry that has become a pillar of the global energy system.

The European energy major, the biggest shipper of LNG after state-owned Qatar Energy, has bet heavily on demand for the gas, which it expects to continue to grow even if consumption of other fossil fuels starts to decline.

“I don’t think the recent announcement by the administration necessarily impacts, in the short or medium term, the supply of LNG, but I do think it erodes confidence in the longer term,” Wael Sawan said in an interview.

In recent months, Shell has also become embroiled in a dispute with US-based Venture Global LNG, alleging the company is refusing to honour a multibillion-dollar supply contract. Alongside BP, it launched arbitration proceedings against the company in September. Venture Global has denied the allegations.

“You add [the Biden decision] to the behaviour of Venture Global in not honouring the contracts with their foundation buyers,” said Sawan, “All of that I think starts to just raise more questions on the stability and security of LNG from the US.”

Kathy Mikells, chief financial officer of ExxonMobil, also criticised the decision, saying it could damage efforts to wean countries off coal. “It means less US produced natural gas is available to replace coal around the world — that’s clearly a bad thing,” she told the Financial Times.

Exxon is building a $10bn LNG terminal in Texas, expected online in 2025, but it has already secured the necessary permits

Chevron CFO Pierre Breber said his company’s position was that energy policy should not be a question of politics. “The world needs affordable, reliable, ever-cleaner energy,” he told the FT. 

“US LNG exports are good for this country: it creates jobs, it helps the balance of trade. It’s good for our allies who are looking for sources of energy . . . And it’s good for the environment, because . . . in many instances the LNG is [replacing] coal.”

Chevron does not own LNG infrastructure in the US but has agreements to purchase supply due to come online in the coming years — including at Venture Global’s CP2 terminal, which has not yet been approved. 

The decision to pause approvals for LNG export plants has been widely interpreted as an attempt by the Biden administration to win support in an election year from climate-conscious voters, who argue that the multibillion-dollar plants will lock in reliance on fossil fuels for decades.

Europe, in particular, has become heavily dependent on US LNG to replace piped gas from Russia since its invasion of Ukraine in 2022.

Like other fossil fuels, LNG releases carbon dioxide when it is burnt. In addition, methane, which is the main component of natural gas, is a much more potent greenhouse gas than CO₂ when it leaks into the atmosphere.

However, Shell and other producers, argue LNG has a role to play in the energy transition because, when burnt, it produces half the CO₂ of coal for the same amount of energy and 30 per cent less than oil.

“We are . . . firmly of a view that demand for LNG will continue to grow,” Sawan said. “It plays into both energy security in regions like Europe but also Asia, and critically it plays into [the] energy transition, as countries like China and India use gas to decarbonise and move away from coal.”

Shell plans to invest $4bn a year in LNG projects until 2025 and to increase the volume it sells by 20 to 30 per cent by 2030. Its integrated gas division, which is dominated by LNG, generated half of Shell’s $28.3bn in profits last year.

The company’s focus on the fuel dates from the start of the industry. It shipped the first commercial cargo of LNG, from Algeria to the UK, in 1964 and later that decade was instrumental in developing the Asian LNG market as a partner in Brunei LNG. Before then gas was largely considered an unwanted byproduct of oil production and was usually flared on site.

The LNG industry has been built on “reliability [and] long-term security” Sawan added. “Anything that starts to undermine that . . . is just not good for the global markets.”

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