US elections will impact on key energy commodities, including LNG. Democratic presidential nominee Joe Biden last month said it would remove tariffs imposed by the Trump administration on Chinese goods. This could give incentives to China to completely remove retaliatory tariffs on US LNG. Before the coronavirus pandemic, the US is expected to be the world’s biggest exporter of the fuel. At the same time, China is on its way to becoming the world’s largest LNG importer.
Removing the trade barrier will unlock massive potential in the LNG trade between the world’s two most powerful economies. Import tariffs have been an obstacle in the negotiations over long-term LNG supply deals. To date, only Cheniere Energy has a long-term supply contract with a Chinese partner.
Biden’s $2-trillion climate and energy plan focuses on clean energy and infrastructure and does not mention LNG exports. He will also likely reimpose stricter methane-reduction standards that Trump rescinded earlier this year. The methane standard, however, can help the industry to meet carbon intensity standards to export to the European markets. LNG developers are expected to face greater scrutiny to secure federal permitting under the Biden presidency. However, the new regulations will unlikely to affect the existing LNG export licenses that encompass roughly 25 Bcfd of liquefaction capacity.
On the other hand, the risk of worsening relations with China is expected to persist under the Trump administration. However, Trump is expected to move forward with the deregulation push on the fossil fuel industry. This will make shale gas drilling easier and the federal permitting process faster. The Trump administration makes LNG the critical piece under its agenda of American energy dominance, by promoting the fuel in front of foreign state heads and approving many LNG export projects.
