Sanctions on Russian energy imports in the wake of the Ukraine war appear to be improving prospects for U.S. and Canada liquefied natural gas players and projects to supply needs in Europe and elsewhere, but the clean-energy push could cloud long-term growth prospects. 

The Biden Administration said March 25 it will boost LNG shipments to Europe by 15 billion cu meters this year. The U.S. sent 22 billion cu m in 2021, which the White House said had been a record. The total is 50% over 2020, driven by Europe and Asia demand, the U.S. Energy Information Administration said in a recent update.

In 2021, annual liquefaction capacity use at six U.S. LNG export terminals averaged 102%, and 89% at peak capacity, the agency reported. Venture Global LNG Inc. added a seventh, with its Calcasieu Pass terminal in Louisiana exporting its first LNG on March 1 and expanding production as trains come online, said S&P Global on March 25.

The U.S. will lead global LNG exports in 2022, according to a Shell plc outlook released on Feb. 22.  Close to 75% of LNG exports in 2022 have gone to Europe, up from 34% at the same point in 2021.

The Energy Dept. on March 16 increased authorized LNG exports from Cheniere Energy operating sites—Sabine Pass in Louisiana and Corpus Christi in Texas—to a total of 0.72 billion cu ft per day. They can now export “to any country where not prohibited by U.S. law or policy,” DOE said.

The European Union is targeting a two-thirds cut in Russian gas dependence this year and a halt to all fossil fuel imports by 2027, Reuters said, adding that Russia supplies about 40% of European gas needs.

The US and EU also announced a task force to develop strategies to accelerate that cut-off, including construction of more European import infrastructure, but also reducing its dependence on natural gas and implementing technologies to use cleaner fuel and cut methane emissions.

In a statement, industry group The Center for Liquefied Natural Gas voiced support for the action.

But environmental advocates remain concerned that the boosted shipments and new projects will spur longer-term gas use and create safety and health risks, particularly with the number of current and planned export facilities in the hurricane-prone Gulf Coast area.

Fitch Ratings said “certain U.S. LNG projects would see a near-term revenue increase if the European Commission implements its proposal to cut Russian gas imports by two-thirds.” But “longer term upside for LNG projects … may be practically capped by European Union clean energy goals,” among other challenges, Fitch noted.


'LNG Renaissance?'

Even so, S&P Global said "the possibility of a U.S. LNG renaissance" has fueled optimism among developers of several proposed export projects that final investment decisions will move forward, speculating that the Ukraine war could spur approval of between 40 million and 80 million tons per year of new commercial capacity in the next two years, with a number of those projects gaining needed federal permits for construction.

Venture Global LNG announced two new export agreements this month that it said could lead to an investment decision and financing for the Plaquemines LNG terminal, also to be built in Louisiana.

Firm CEO Michael Sabel was optimistic in addressing an energy conference this month that Plaquemines, with set capacity of 20 metric tons per year, could be built quickly. Early work started last year, with operation possibly in 2024, the firm said. Contractor Zachry and engineer KBR are building its first phase, with a McDermott International unit also recently awarded a construction contract.

The Federal Energy Regulatory Commssion approved on March 24 two new gas pipeline expansions, developed by TC Energy and Kinder Morgan, to carry supply to that terminal. Venture Global also has FERC applications pending for two other Louisiana export sites.

S&P also noted progress by other U.S. projects to consider options to expedite development plans.

The LNG push also appears to be gaining new momentum in Canada. The planned $1.6-billion Woodfibre LNG project in British Columbia, which has yet to confirm its final investment decision, gained on March 22 a $500-million financial commitment for 2022 from its leading backer, Pacific Energy Corp., Woodfibre LNG Ltd. President Chrstine Kennedy told provincial officials.

“While we have not yet issued our final notice to proceed, this confirmed investment is indicative of our intent to start pre-construction work this year, and complete this critical low-emission energy project in 2027," she said in a media statement.

Woodfibre named McDermott International last November as EPC contractor for the Squamish, B.C., project, which is set to produce and export up to 2.1 million tons annually.  By using hydroelectric power for the refrigeration process, Woodfibre LNG would be one of the cleanest LNG export facilities in the world, Pacific Energy claims.

The project, if confirmed for full investment, would be Canada's second LNG project underway, but much smaller than the giant LNG Canada export complex that now is 60% complete, being built by a Fluor Corp.-JGC Corp. joint venture in Kitimat, B.C. The $18-billion project has targeted LNG shipments to Asia by 2025, which analysts say could indirectly aid supply to Europe..

LNG Canada said in a statement that its peak construction would start this year through 2024, requiring up to 7,500 workers on rotation.

“This is a very important year for us, with a pace of construction not seen previously," Peter Zebedee, CEO of LNG Canada, said in a March 15 statement. He announced on March 22 that he was stepping down as CEO, effective on March 29, to become a vice president at Suncor Energy Inc.


E&C Sector Impacts

Meanwhile, the push for more North American energy sourcing could also boost construction sector firms, sector analysts say..

Jamie Cook, lead Credit Suisse construction analyst, sees benefit for publicly held Fluor. “Most of its peers have exited oil and gas, suggesting above-average win rates [for Fluor] and more favorable terms and conditions,” she said in an update this month.

Even as contractor Mastec has diversified into clean energy areas, Cook said the firm remains "one of the largest gas pipeline contractors in North America, with peers that have de-emphasized this business.”

Fluor, and equipment giant Caterpillar, also may gain from mining sector expansion driven by rising commodity prices and a need to develop U.S. sources of metais to replace Russia and Ukraine, said Cook. She noted that the firms each project about 20% of revenue from mining.

Credit Suisse cited statistics that Russia produces 3.5% of the world's copper, 5.4% of its aluminum, 9.3% of its nickel and 42.8% of its palladium.

Media now speculate that Biden is set to invoke the 1950 Defense Production Act, possibly in early April, to spur domestic mineral production because of supply chain constraints in producing batteries for hybrid and all-electric vehicles to counter rising gasoline prices, and in clean energy production.

The Senate Energy Committee will hold a hearing on March 31 on domestic supply chain issues for critical minerals production.

Cook said Fluor is pursuing front-end work on $42 billion of projects in the next 18 months.

But leading global reinsurer Swiss Re said this month it would no longer insure new oil and gas projects, citing climate change risks, unless project owners have an independently verified plan to reach net-zero emissions by mid-century. The insurer said it anticipates that by 2025, half of its overall oil and gas premiums will come from companies meeting that requirement.