Steel and Aluminum Tariffs Fail to Shake Confidence in U.S. LNG Development

Recently, against the backdrop of rising costs due to increased steel and aluminum tariffs, developers of U.S. liquefied natural gas (LNG) export projects have begun making final investment decisions on new facilities. Executives from U.S. LNG companies stated during earnings conference calls that despite threats posed by steel and aluminum tariffs, they remain confident about securing timely approval for investments in their projects. At least seven U.S. LNG project developers have recently indicated that their goal this year is to reach final investment decisions on these projects. If these projects proceed, they could triple U.S. LNG export capacity by 2030.

American LNG developers acknowledge potential tariff impacts but have taken proactive measures to minimize associated cost increases. To reduce capital investment risks for new projects, some developers are seeking to sell partial stakes in their facilities to infrastructure funds or industry partners, while also working to secure long-term LNG off-take agreements for these projects. Developers are also increasing domestic sourcing of steel to mitigate tariff effects.

Australia’s Woodside Energy was the first company this year to make a final investment decision on a U.S. export project, approving in April an investment in its Louisiana LNG project—the Driftwood LNG project acquired last year for $1.2 billion. Prior to the final investment decision, Woodside sold a 40% stake in the Louisiana LNG project to infrastructure investment firm Stonepeak. Under the agreement, the infrastructure investor will contribute $5.7 billion toward the anticipated capital expenditures for the facility's initial development. Woodside has also signed a non-binding cooperation agreement with Saudi Aramco to explore the possibility of Aramco acquiring equity in the Louisiana LNG project and entering into LNG off-take arrangements, thereby alleviating the impact of rising infrastructure costs on the project.

Market observers expect more U.S. LNG export projects to reach final investment decisions this year. Jack Fusco, president and CEO of Cheniere Energy, the largest U.S. LNG exporter, said during the company’s first-quarter earnings call that it remains confident in obtaining all necessary regulatory approvals to sanction the expansion of its Corpus Christi terminals—Trains 8 and 9—by 2025.

Karen Sedlack, executive vice president and CFO of Sempra, the developer of the Port Arthur LNG project, said during a conference call that a final investment decision on the second phase of the Port Arthur LNG project is expected by the end of 2025. Sedlack added: "Uncertainties in the macroeconomic environment may affect project development timelines. But as we have done in the past, we will remain patient, continue efforts to reduce cost risks, and lock in favorable long-term economics."

U.S. pipeline giant Energy Transfer plans to finalize investment decisions for its Lake Charles LNG export project in Louisiana by the end of this year, as the company continues securing LNG off-take commitments.

Meanwhile, investment firm Venture Global urged the Federal Energy Regulatory Commission (FERC) to approve its third liquefaction plant, CP2, in Louisiana, by mid-year. Mike Sabel, CEO of Venture Global, said during the company’s earnings call: "The current regulatory environment supports the U.S. LNG industry, and we have already initiated the final investment decision process for Phase 1 of the CP2 project with our established banking consortium."