Analyst Note| Stephen Ellis |
We are highly bullish on liquefied natural gas demand over the long run, particularly from China. However, that doesn't mean that U.S. LNG exporters such as Cheniere have clear and unobstructed growth prospects as far as the eye can see, particularly on the ESG front. New EU rules, in place in 2024, aim to bring exactly that risk into sharp focus and disincentivize Europe from taking U.S. LNG exports. This shift means that Cheniere must pivot to show it can be a leader within the LNG industry very quickly unless it wants to lose access to a major LNG export market (40% of recent demand). The situation, in our view, calls for U.S. industry leadership to push for changes through the U.S. LNG supply chain in terms of reducing methane and carbon emissions, a role that Cheniere is willing to embrace.