As natural gas plays an increasingly important role in the global energy transition and global energy trade, the strengthened position the US has taken in the global liquefied natural gas (LNG) market has become an urgent reminder that vigilance is needed as to the impact of Washington’s growing energy hegemony and potential measures it may take to strengthen or maintain that hegemony.
The US has become the world’s biggest LNG exporter for the first time, with 2023 shipments overtaking leading suppliers Australia and Qatar, Bloomberg reported on Wednesday. The US exported 91.2 million metric tons of LNG in 2023, a record for the country, according to data through the end of 2023 compiled by Bloomberg.
The rise of the US from becoming a net natural gas exporter in 2017 to being the world’s largest LNG exporter reveals significant changes in the global LNG market in recent years. The reason why the US position in the global energy landscape can be further consolidated is mainly due to its growing LNG output and huge demand from its European customers.
European demand for American LNG currently accounts for more than 60 percent of total US LNG exports. This has to do with the European countries’ determination to reduce dependence on traditional fossil fuels and realize the energy transition, and wean themselves from dependence on Russian energy supplies under the impact of Western sanctions against Russia.
It is important to note that with US LNG output likely to climb, the country is expected to further increase its exports. This year, two new LNG projects in the US are due to start production: Venture Global LNG Inc’s Plaquemines facility in the state of Louisiana and Golden Pass in Texas.
At full capacity, the two projects would add 38 million tons a year from the US, according to Bloomberg.
What changes will this development bring to the global energy market? It wasn’t uncommon in recent years to see the US try to affect energy prices and hit other energy exporters it deemed as hostile by means like trade sanctions and energy channel controls.
As a result, the US now enjoys both global financial hegemony and global energy hegemony. It is the combination of the two that has given the US a huge price influence in the global energy market, including oil and LNG.
It also makes the US more dependent than ever on sanctions to maintain its hegemony. For instance, sanctions that the US imposed on Russia’s newest Arctic LNG 2 project in November 2023 resulted in delayed supplies from the project as Novatek declared force majeure on shipments, Bloomberg reported in December 2023.
The US in December also imposed sanctions on more than 250 companies and individuals in China, Turkey and the United Arab Emirates, as it targeted Russia’s sanctions evasion, future energy capabilities, banks and its metals and mining sectors.
As one of the world’s largest LNG importers, China needs to be wary of the spillover effects of US abuse of its hegemony in the energy sector. China has imported LNG from multiple sources, including but not limited to Australia, Qatar, Malaysia, Russia, Indonesia and the US. Diversification of natural gas imports is in China’s interest from the perspective of energy security.
While there is no denying that China’s LNG trade may face risks from price fluctuations, exchange rates and contract compliance, US energy hegemony has become a major source of uncertainty that cannot be ignored any more.
Nevertheless, whenever and with whom China engages in energy cooperation, it should be based on China’s own needs, not US unilateral sanctions and long-arm jurisdiction. The more aggressive the US appears in asserting its financial and energy hegemony, the more China needs to diversify its energy imports to maintain energy security. It also reminds us not only to break the US control in the settlement of energy trade, but also to coordinate with more countries to ensure the safety and reliability of energy transport routes.
Global Times
