LNG Takes The Crown in Trump’s Energy Push

Last week, U.S. President Donald Trump unveiled the National Energy Dominance Council that is tasked with enhancing America’s energy security and cutting reliance on foreign entities. According to a White House statement, the Biden-Harris Administration dramatically slowed the growth rate of American energy production and development, including by instituting a federal oil leasing moratorium and removing hundreds of million acres from being available for energy production. Trump’s White House claims that over the past four years, it is estimated that the U.S. produced over two billion fewer barrels of oil than anticipated by trend (had President Trump’s energy policies been kept intact), a vast quantity of lost supply that could have lessened the burden of energy prices on American families.

For the second time, the Trump administration emphasized the importance of the country lowering its reliance on China’s critical minerals, noting China’s recent weaponization of its resources through bans on exporting germanium, gallium, and antimony to the United States. A couple of weeks ago, one of Trump’s many “Unleashing American Energy” directives required the Secretary of the Interior to instruct the director of the USGS to “consider updating the survey’s list of critical minerals, including for the potential of including uranium.” Categorizing uranium as a critical mineral would open up federal funds and fast-track permitting for domestic uranium projects, throwing the domestic uranium sector a lifeline.

Related: Extreme Winter Conditions Delay Petronas’ First Canadian LNG Shipment

However, one of the sections that really stood out in that statement was the importance of the LNG sector to the new administration. As one of his first executive orders, Trump expedited the LNG export license process (achieving licensing times one-sixth as long as those seen during the Biden Administration, which revoked these reforms), reduced the permitting time for drilling on federal lands (increasing permit applications by 300%), fixed the New Source Review (which punished companies for repairing and upgrading coal power plants), and opened up millions of acres for domestic energy development. Trump warned Western Europe as early as 2017 to rely on American natural gas rather than Russian energy.

Trump has repeatedly vowed that he’ll push shale producers to ramp up oil output, even if it means operators “drill themselves out of business.” However, it’s not clear how he intends to accomplish this feat since U.S. oil is produced by independent companies and not a national oil company (NOC). It’s more likely that the U.S. natural gas and LNG sector will do most of the heavy lifting in Trump’s goal to unleash American energy. Last month, commodity analysts at Standard Chartered noted that that following Scott Bessent’s nomination as Treasury Secretary, his Manhattan Institute June session where he spoke at a conference entitled ‘Towards a New Supply-Side: The Future of Free Enterprise in the United States’ was heavily scrutinized as a potential guide to the new administration’s energy policy. During that talk, Bessent was asked which version of the late Shinzo Abe’s three arrows economic plan he would recommend to an incoming President Trump.

A keen admirer of Abe, Bessent put forward the three targets of 3% economic growth, cutting the budget deficit by 3% of GDP by the end of the administration and “Three million more oil barrels equivalent a day from U.S. energy production”. StanChart pointed out that many commentators were [incorrectly] interpreting Bessent’s comments to mean he would urge the Trump administration to raise U.S. crude oil production by 3 million barrels per day (mb/d), good for a huge 30% to about 16.5 mb/d by 2028. The analysts claimed that Bessent meant the addition of 3 million per barrels of oil equivalent (mboe/d) to U.S. energy production by 2028, an objective well within the means of U.S. producers.

StanChart pointed out that U.S. oil and gas output is currently ~40.7 mboe/d. U.S. oil and gas output has grown by an average of about 123 kboe/d per month since 2015, meaning adding 3 mboe/d would take less than 25 months. The commodity experts have noted that 41% of the post-2015 increase has come from natural gas, 28% from natural gas liquids (NGLs) and just 28% from crude oil. StanChart has predicted that the crude oil element of the next 3 mboe/d increase is likely to be significantly less than 20%, with natural gas likely to be the main instrument for meeting the new administration’s energy goals as crude oil output growth becomes increasingly difficult.

StanChart is not the only natural gas bull here. 

Last November, Morgan Stanley predicted that the U.S. natural gas market is poised to enter a new cycle of demand growth thanks to surging LNG exports and skyrocketing electricity demand. Over the past few years, dozens of pundits and industry experts have predicted that the ongoing Fourth Industrial Revolution will drive unprecedented electricity demand growth in the United States and globally. Last year, the power sector consulting firm Grid Strategies published a report titled “The Era of Flat Power Demand is Over,” which pointed out that United States grid planners—utilities and regional transmission operators (RTOs)—had nearly doubled growth projections in their five-year demand forecasts. For the first time in decades, demand for electricity in the U.S. is projected to grow by as much as 15% over the next decade driven by the Artificial Intelligence (AI), clean energy manufacturing and cryptocurrencies boom.

By Alex Kimani for Oilprice.com

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