U.S. Becomes World's Top LNG Exporter in Just 10 Years; Private-Sector Driven Innovation is the Driving Force

The U.S. began exporting liquefied natural gas (LNG) in 2015 and started full-scale shipments in 2016. In just 10 years, the U.S. has established itself as the world's largest LNG exporter. This is a very rapid growth rate compared to Qatar and Australia, the former top exporters, which took about 30 years to increase production and become the world's No. 1 in the global market.

There was strong opposition to LNG exports within the U.S. In particular, fertilizer and petrochemical plants, which use natural gas as a main raw material, worried that LNG exports could lead to higher domestic gas prices. These companies, which had long struggled with high gas prices, argued that LNG exports would intensify competition between domestic consumers and export markets, and they organized their opposition. Furthermore, there was a regulatory sentiment against fossil fuel exports in the U.S., including past prohibitions on crude oil exports, which caused difficulties in the LNG export permit process.

The growth of the U.S. LNG export market demonstrates a private-led innovation model, completely different from China's state-led infrastructure development model. The U.S. government did not directly invest in LNG exports; this achievement was a result of private creativity and innovation, fierce competition, and capital. Over 500 trillion won in large-scale investments were made solely with private capital without government subsidies, proving the capabilities of the private sector. This private-led approach enabled quick decision-making and risk-taking, leading to rapid market entry and growth.

Cheniere Energy originally aimed to build LNG import terminals but faced bankruptcy when the shale gas revolution caused a surge in U.S. natural gas supply. The company presented a groundbreaking model by inverting its approach and converting import terminals into export facilities. Cheniere announced its plan to modify existing facilities to export shale gas to the market and successfully convinced investors. It gained the trust of major capital markets like Blackstone, securing funding, which became the successful starting point for U.S. LNG exports.

Just as shipyards would secure vessel purchase contracts with only designs and construction plans, and then use those contracts to raise funds from large investors like BlackRock, Cheniere also first secured gas purchase contracts. It then used these contracts as collateral to raise a large-scale project fund of 20 billion dollars from capital markets, including BlackRock.

Around 2010, Cheniere Energy recognized that its existing LNG import business was no longer viable. Consequently, it requested the U.S. government to change its import license to an export license. Instead of abandoning a failing import business model, they made a bold pivot, actively seeking new export business opportunities based on it.

The startup culture and capital market in the U.S. are very lenient in tolerating failure. Although there are far more failed models than successful ones, if a business idea is still deemed viable, failed founders are not held personally responsible. Instead, there is a tendency to continuously provide funding, seeing the potential of the idea. This culture acts as a much stronger driving force for innovation than government policy drives, encouraging new attempts and challenges.

Even in areas close to gas production sites, obtaining permits can be difficult if residents strongly oppose. Conversely, residents in areas with over 100 years of oil and gas industry experience have an understanding of and a favorable attitude toward energy projects, which greatly aids project progress. Such support from local residents is a prerequisite for forming LNG clusters, demonstrating the importance of a model that coexists with the community. Since residents may raise environmental concerns and objections to large-scale exports, persuading and collaborating with them from the early stages is essential.

The way large-scale national projects are promoted in Korea still tends to be decided from the top and handed down, which has many limitations. For successful projects, a preliminary review of local residents' willingness to accept civil complaints is necessary, and to this end, it is necessary to introduce a local government bidding system. By proposing a specific project and having regions that wish to attract it voluntarily apply and offer incentives through a bidding system, it is possible to increase local voluntary participation and resident acceptance. However, such a concept is still not clearly visible in Korea, which is regrettable.

The Korean bureaucracy tends to focus heavily on auditing to check for regulation violations, making it difficult for public servants to actively take risks. In contrast, some countries, like Australia, use cases where impossible tasks were successfully accomplished through effort as promotion criteria. This encourages public servants to innovate and actively solve problems. Korean society has a strong atmosphere of not tolerating failure, making it easy for public servants to fall into conservatism, and this culture hinders innovation.

In the U.S. energy business startup culture, the personal assets of founders are not directly linked to the business. There is no concept of personal guarantees; founders invest their time and effort, and investors provide capital, creating a clear separation of roles. This allows founders not to bear the full risk of failure personally, creating an environment where more people can pursue innovative ideas. Investors also focus on the potential for business success when making investments.

Korean society tends to glorify and praise successful individuals to an extreme, while being very harsh on those who fail. This polarized view instills fear of failure and hinders innovative attempts and second chances. It is actively necessary to reduce the praise for successful people and provide opportunities for second chances and social consideration for those who have failed, thus fostering a society that tolerates failure.

Existing major energy corporations became bloated and bureaucratic, complicating decision-making processes. This often led to internal rejections, making it difficult to undertake innovative, risk-taking attempts. In contrast, the strength of the U.S. is its ability to provide space for people with 'outrageous ideas' to make new attempts. This rigid decision-making structure and risk-averse tendency of large corporations were among the main reasons why new companies took the lead in the LNG market.

In Korea's investment review process, there is a strong tendency to demand a 'guarantee of success' for target projects. This question is frequently raised, especially during investment reviews for the U.S. However, the U.S. LNG model is based on innovative business models where success is not guaranteed from the outset. Investment is inherently a risk-taking activity, so the question 'Who can guarantee it?' may not be suitable for such innovative models. The U.S. model focuses on taking risks and creating new opportunities.