Trade War Puts The Brakes On U.S. LNG Dominance



Jon LeSage | Nasdaq

The U.S.-China trade war is throwing off a new liquefied natural gas production plant in North America, as LNG Ltd. loses Chinese customers. Australia-based LNG Ltd. saw its share prices plunge 29 percent after CEO Greg Vesey discussed the problem in a quarterly report. LNG Ltd.’s Magnolia plant in Louisiana was counting on Chinese investors to ramp up its capacity of reaching 8 million tons per year of LNG. The company will now be delaying a final decision on whether to build the U.S. plant. The company had been planning to build two plants — Magnolia, where it planned to begin exports in 2022, and another in Nova Scotia, Canada. China is a leading global market for LNG. Energy consulting firm Wood Mackenzie forecasted that the market would see its record 8 mt demand last year shoot up to 12 mt this year. That will account for 50 percent of all global LNG demand growth, the firm reported. That growing demand will likely help to offset an LNG global supply glut. China sees LNG as crucial in its efforts to clean up urban air pollution, with the government setting a target of reducing coal usage and having natural gas make up at least 10 percent of its power generation by 2020. The country has already spurred LNG demand along, benefitting global LNG suppliers. Beijing’s pollution crackdown has spurred Chinese LNG demand in recent years, with imports nearly tripling since 2015. Last year, China surpassed South Korea and to the world’s No. 2 importer of LNG. President Donald Trump had been promoting the U.S. as the dominant supplier of the super-cooled fuel as export demand grows particularly in Asia. Canada has been competing for market share, helping to make the region a strong player in LNG. Royal Dutch Shell just approved a major Canadian project, raising enthusiasm for the North American market. The ongoing trade war between the two nations, and China’s recent decision to impose an LNG tariff, is taking away interest in China for LNG coming from suppliers like LNG Ltd. The company acknowledged the difficulty of lining up Chinese customers for its fuel.  

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