Analysis by Energy Workforce President Tim Tarpley
Despite significant market volatility, there are potentially some upsides to the continuing effort by the Administration to balance trade deficits around the world. One of the most logical and easiest ways for a number of regions to balance their trade deficit with the United States is to purchase more American LNG. This is a win-win proposition for both sides as regions can increase their reliance on reliable American LNG. At the same time, the US can benefit from increased US production that supports the US economy and workforce.
The US-EU trade relationship is a perfect example of the opportunities that exist. In 2024, the US-EU trade deficit was $235.6 billion. US LNG exports to Europe were around $13 billion. While there is a significant gap between those numbers, it represents a significant opportunity, especially considering that the EU aims to wean itself off of Russian gas by 2027. The EU’s move away from Russian gas since the start of the Russian invasion of Ukraine has already helped bolster US LNG. President Trump has called on the EU to bridge this gap with LNG, indicating that this is a real possibility for both sides. It may not be able to bridge the entire gap, but it can bridge a significant portion.
As an indication of this possibility, the EU side is exploring flexibilities in how it applies EU methane rules, which could benefit U.S. LNG exporters. The EU has moved forward with aggressive new methane rules that could potentially place burdensome and costly new requirements on gas that aims to be exported to the EU market. The aim from the EU side would be to avoid weakening the overall law, while introducing technical rules that could enable U.S. exporters to be deemed to be following “equivalent” methane rules to those of the EU. While the details of this plan remain vague and subject to change, it is very promising from the US production side for a deal to include some sort of waiver or easing of requirements on US production. Any such move would have to work in close coordination with any changes to the methane regulation on the US side. However, if talks are successful, this is something to watch very closely as it could provide a long-term, predictable demand for US production.
A European Commission spokesperson declined to comment directly on the negotiations this week: “The Commission has an ongoing dialogue with industry on all relevant matters related to our legislation,” the spokesperson said.
The EU is not the only region where trade disparities can be rectified through LNG. Japan, South Korea, and other Asian locations could also be in play. China certainly is on the table as well. However, China has essentially stopped all American LNG exports due to the ongoing trade dispute between our countries. This leverage could certainly come back into play as discussions move forward.
Tim Tarpley, Energy Workforce President, analyzes federal policy for the Energy Workforce & Technology Council. Click here to subscribe to the Energy Workforce newsletter, which highlights sector-specific issues, best practices, activities and more.
