Baker Hughes annual meeting: DOE official tries to calm LNG furor

Kurt Abraham, Editor-in-Chief, World Oil January 30, 2024

(WO) - During the first day of the Baker Hughes Annual Meeting on Monday in Florence, Italy, a U.S. DOE official tried to explain the Biden administration’s sudden move to stop issuing LNG export licenses. Supposedly, the action was taken on Jan. 26, to give the administration time to analyze how LNG shipments affect climate change, the economy and national security.

But many industry entities and Biden critics in general have criticized the ban heavily, noting that any moratorium lasting more than a few days is likely to disrupt plans for billions of dollars in projects along the U.S. coastline. They describe Biden’s action as nothing more than an election-year ploy to hold onto the President’s climate change adherents at the ballot box in the fall. How convenient, they say, that this moratorium on new LNG export licenses could delay decisions on new plants until after the Nov. 5 election. And, they point to the disruption this could cause to U.S. LNG exports continuing to replace Russian natural gas supplies in much of Europe.

Fig. 1. Assistant DOE Secretary for Fossil Energy and Carbon Management, Brad Crabtree

Addressing the ban at Baker Hughes’ annual meeting. So, fast-forward to Monday morning’s panel at the Baker Hughes Annual Meeting entitled, “Ministerial Panel Discussion: Is Global Governance the Solution for the Energy Trilemma?” This was a panel discussion intended to discuss how governmental policies around the world are adapting to accelerate the achievement of energy transition targets. But that didn’t stop panel moderator Dan Murphy (a CNBC anchor and correspondent based in the UAE) from asking one of the panel participants, Assistant DOE Secretary for Fossil Energy and Carbon Management, Brad Crabtree (Fig. 1), for an explanation of the LNG controversy.

Dazzling the crowd with facts and statistics. At first, Crabtree tried to deflect the question by going through a litany of U.S. natural gas achievements and statistics. “let me start by taking a just a short step back,” he explained, “and recognize the absolutely essential role for gasoline in the energy security and national security of our European countries and allies and around the world, and especially following the Russian invasion of Ukraine. As a new source of gas on the market, the U.S. natural gas industry stepped into the breach and, I would argue, helped underwrite political and economic stability in Europe and other parts of the world. I take that first step very seriously, as do my colleagues at the Department of Energy and others in the Biden administration. It's also important, though, and bear with me, because this is not just for me, because you're not going to just walk through where we're really at with natural gas production and exports in the United States. You all in this audience know that one of the most consequential and transformative things to occur, probably in the history of energy, is the shale gas revolution in the United States. In the early part of the last decade, we were poised to become a natural gas importer. And then we started exporting natural gas in 2016. By 2018, we had export capacity of 4 Bcfd, or around 40 MMm³ per year. Now, our export capacity stands at 14 Bcfd. Today, we're a little over 140 MMm³ per year. We're exporting well.

And then, there were more statistics. Obviously not satisfied that he had dazzled the audience with details of U.S. natural gas exports, Crabtree continued. “We have authorized export additional exports of 12 Bcfd, or over 120 MMm³ per year. It will come online between now and 2030. That is essentially a doubling of our current production and exports today that will be going to our overseas markets. On top of that, we have authorized an additional 20 Bcfd, or over 200 Bm3 per year for exports that do not yet have a financial investment decision. The total volume of authorized exports in the United States is 48 Bcfd, or over. Again, it's a little bit more than 480 MMm³. To put that in context, that's about 45% of our domestic natural gas production that's already authorized for export...We were very careful to make sure that our decision did not affect intermediate-term exports and infrastructure that will come online in the next two years. Our situation is that we have had the most rapid, dramatic expansion in natural gas production and exports, probably in history.

More reasons to “be responsible.” Crabtree commented on the pause further. “From five years ago, we are duty-bound as a regulator to make sure that we're using the most up to date information our national labs are working with us, and we will make it in a few months’ time, that analysis is available for public comment. That is not just limited to public comment in the United States. Our allies, both in government and industry around the world, can feel free to provide comment. It will be a robust analysis. I actually believe that it will serve the industry well. In terms of responding to criticism, whether it's about domestic pricing in the United States or climate implications of our exports, it is a sense of responsibility to our domestic consumers, and we have a special role as the world's largest oil and gas producer/exporter to take our findings and obligations very seriously.

So, what will be assessed? But Murphy would not be deterred. “So, help me understand what exactly will be assessed in the public interest here, because U.S. LNG, we know, is markedly cleaner than coal and oil, for example, which is why critics have said this is a shortsighted decision.” This line of questioning seemed to cause discomfort for Crabtree, who looked like he was composing his answers on the fly and not feeling very comfortable doing it.

“So, we will look at domestic and international economic impacts, explained Crabtree. “We will substantively look at energy security and national security implications. And then of course, environment. And in the case of environment, it's both greenhouse gas emissions and local and upstream environmental impacts. And these those factors are what we apply in determining whether additional exports are in the national interest. So that's the process that becomes the analysis that we're updating.

What should the industry think? Ever tenacious, Murphy then asked Crabtree, “And just finally, what's your message to the industry and those who say this decision undermines the ability and willingness to invest in the sector and jeopardizes national security? And it sends a message, finally, to America's friends and allies that they can no longer rely on the U.S., particularly given this uptick in regulatory uncertainty that we now see coming into.

“Well, let's take the last first,” said Crabtree. “As a matter of fact of where we're at in our domestic production and exports, and where we are going to. We are playing the biggest role in the world in terms of providing products to the global marketplace. That has not changed so much in terms of the energy security of the United States or our allies. It's unaffected. Now, I recognize in the administration that for those projects that are in the development pipeline, they don't even have the permits from our Federal Energy Regulatory Commission before they can come to the Department of Energy. They are faced with more uncertainty, and that's why they're there. This is a pause while we update our analysis. It's not a ban. And I want to make that very clear. That's the position of my Secretary, and it's also in a statement from the White House that we are pausing in our analysis, and our authorizations, to update our analysis, so we can be more responsible, with informed decisions from an economic environmental potential.

Final thoughts. After all of that back-and-forth between Murphy and Crabtree, one could not fault the audience from looking a bit fatigued. And this editor found himself still musing as to the real motivation for Biden pausing LNG export licensing.

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