This excerpt is from a report that is available to subscribers of Stratas Advisors’ Asia, Global LNG, Global Natural Gas and North America services.

Just four months after taking office, the Trump administration has made it clear that the LNG export industry will be a priority for the U.S. going forward. Less than a month after Gary Cohn, the director of Trump’s National Economic Council, named the permitting of the Jordan Cove project as his first priority, Commerce Secretary Wilbur Ross announced a trade agreement between Washington and Beijing that would open up Chinese markets for U.S. LNG exports, among other things.

Though much of President Donald Trump’s trade rhetoric had been focused on China throughout the campaign and the beginning of his term, he has largely fixated on trying to right the imbalance of trade between the two countries rather than attempt to end or reduce trade altogether. Indeed, this deal that will encourage American exports to China and potentially lend support to the idea of Chinese investment in U.S. infrastructure falls in line with Trump’s stated goals of restoring the global power of the U.S.

A perceived supply glut in the LNG industry, coupled with prices that have plummeted in key Asian markets in the last several years, has largely dried up liquefaction investment. Stratas Advisors expects that global demand will continue to materialize at a much faster pace than most projected, necessitating the sanctioning of strategic liquefaction investment.

While other promising liquefaction proposals exist (mainly in East Africa), Stratas Advisors considers U.S. projects, specifically those on the Gulf Coast, to be most advantaged in meeting that demand. Favorable local and federal government agencies, along with a robust pipeline system and vast gas resources to draw on, make projects located in Texas and Louisiana the most cost-effective and sensible proposals.

The lone disadvantage of these projects appears to be location. The U.S. Gulf Coast’s distance from Chinese regasification terminals adds a wrinkle, particularly given a wave of new liquefaction capacity in Australia in addition to the massive existing capacity in Qatar. Despite relatively low LNG carrier rates at the moment, the distance differential between Western Australia and the U.S. Gulf Coast can add up to $2/MMBtu, which is a significant amount in the age of mid-single digit LNG cargo prices.

The agreement between Beijing and Washington is unlikely to be a silver bullet or the spark to reignite the fire that engulfed the North American LNG industry as recently as 2014. But given the need for buyers to diversify their supplies, particularly as their dependence on LNG grows, it is reasonable to expect that this deal will serve as the framework to support another round of investment in U.S. liquefaction.