Higher U.S. LNG exports to Europe under Trump risk market glut, instability
Trump’s re-election could mean more U.S. LNG exports being sent to Europe, even though EU gas demand is already in decline.
Donald Trump taking office as president of the United States for a second mandate in January raises questions about the potential impact of higher LNG exports on European gas markets, at a time when Europe’s gas demand is already in decline.
Domestically, Trump is expected to unlock the licensing of new LNG export projects, which had been put on hold by the Biden administration.
In his electoral campaign, he promised that on his first day of office he would end the halt on new LNG export permits for sales to countries that don’t have a free trade agreement with the U.S.
Already, the U.S. is Europe’s biggest supplier of LNG, amid a shift towards liquefied gas prompted by the Ukraine conflict; supplies to Europe accounted for nearly half of all imported LNG volumes in 2024.
An increase in U.S. LNG supply capacity would positively impact availability of gas to Europe., though critics say that LNG imports can represent an unstable form of energy supply. In addition, European gas demand has progressively declined in recent years, leading to under-utilised capacity at re-gasification terminals, meaning that more U.S. LNG exports to Europe risks market over-supply.
EU gas demand has decreased by 3% in 2024. LNG’s share of EU gas imports declined from 38% between January and November 2023 to 33% in the same period of 2024, data from the Institute for Energy Economics and Financial Analysis (IEEFA) shows.
“Falling gas use for power has been a great contributor to the decrease in EU gas consumption,” Ana-Maria Jaller-Makarewicz, an energy consultant at the IEEFA, told Gas Outlook.
“The surge in renewable energy deployment and energy efficiency mechanisms have led to a 15% drop in EU gas power generation in 2024,” she added.
Utilisation rates slide
This has contributed to the average utilisation rate of EU LNG terminals dropping from 58.7% between January and November 2023, to 42.8% in the same period of 2024.
Although the U.S. accounts for almost half of Europe’s LNG imports, volumes from the U.S. decreased by 19% year on year between January and November 2024, she noted.
“The EU could stop all Russian LNG imports in 2025 and satisfy its 2030 gas demand without additional LNG imports if it stays on track towards its 2030 climate goals.”
Gas and LNG are often cited as an intermediate or temporary climate solution. But recent research indicates that LNG has a worse climate impact than coal, due to high methane emissions across the supply chain.
The EU has adopted Methane Regulation, which would limit imports of gas with high methane intensity. But in October, a new lawsuit alleged that the EU has failed to limit gas imports that are linked to high methane emissions.
Meanwhile in the U.S., according to WoodMackenzie analysis, risks related to LNG development remain, as the Trump administration will have limited influence on the lawsuit that threatens to vacate Federal Energy Regulatory Commission approval for the Rio Grande and Texas LNG projects.
“And while President-elect Trump might well shelve the soon-to-be-published Department of Energy study on the environmental impact of the U.S. LNG industry, environmentalist groups will likely step up legal efforts to stop projects, possibly leveraging the study itself,” the consultancy said.
“Trump’s economic manifesto also poses a risk” as “proposed import tariffs could make U.S. LNG exports a target for retaliation, while the anticipated increase in domestic gas prices could still prompt second thoughts on how much additional LNG should be exported,” it added.
Russia-Ukraine conflict
Meanwhile, Trump has said one of the priorities of his mandate internationally is to end the Ukraine-Russia War, leading some commentators to ponder whether this might bring some countries, such as Austria, Hungary and Slovakia to seek to ramp up Russian pipeline imports once the conflict ends.
However, the idea that Trump might be able to quickly end the war is “fantastical…I don’t think Trump will find it easy to end the war in Ukraine” given “the fine balance” of different interests involved, John Lough, associate fellow of the Russia and Eurasia programme at Chatham House, told Gas Outlook.
Noting the support of some European leaders, including Angela Merkel, for key infrastructure projects such as Nord Stream 2 in the past, he said that “if there were a peace deal, some constituencies (in Europe) will want to restore” the gas trade relationship with Russia, but in any case that would be “much less than in the past…as they say, once burned twice shy.”
Europe is a “lost market” for Russia, and it is “unlikely that that will ever return,” he argued.