U.S., EUROPE LNG GOALS

PLATTS- 25 Mar 2022 - A US pledge March 25 to supply an additional 15 Bcm of LNG to the EU in 2022 and potentially hike that to 50 Bcm/year by 2030 came with White House assurances to maintain "an enabling regulatory environment" that the gas industry hopes will ease hurdles and create a more positive investment environment for bringing gas infrastructure online. 

At the same time, environmental groups in the US are raising alarms that the Biden administration should be doing more to accelerate the transition to renewable energy without locking in more fossil fuel production and assets. 

Following a meeting with European Commission President Ursula von der Leyen in Brussels, President Joe Biden announced a new task force between the US and EU with a "joint game plan" to quickly reduce Europe's dependence on Russian gas and also accelerate "progress toward a secure clean energy future" by "reducing Europe's demand for gas overall." 

Biden homed in on the energy security priority of getting European families through the next winter with a buildout of gas storage and LNG import terminals that "is consistent with, not in conflict with, the net-zero climate goal." 

The second part of the new task force's initiative, he said, creates an opportunity to double-down on clean energy investments as the US and EU have committed to maximizing the availability and use of renewable energy, speeding deployment of energy-efficient and electrified technologies and advancing hydrogen and other "innovative solutions to make the switch from fossil fuels."

Regulatory support

Amid Russia's invasion of Ukraine, the US natural gas sector had pushed the Biden administration to turn attention to pending LNG project applications they said were bogging down in regulatory reviews. 

The Department of Energy and Federal Energy Regulatory Commission will have key roles to play if the US aims to expand its LNG export capacity and ability to move domestically produced gas to those terminals. Officials at both are juggling how to aid European allies without losing sight of domestic climate goals. 

"There's always concern about increasing infrastructure that would lock in problems related to greenhouse gas emissions," Energy Secretary Jennifer Granholm told reporters March 24 when asked about plans to send gas to Europe. 

However, she was confident that in "this moment, we can do two things at once, which is to increase supply as well as to increase the technologies to abate natural gas and obviously push toward electric vehicles." 

"Recent movement by [DOE] to approve pending LNG export applications and [the March 24] decision by [FERC] to postpone the new natural gas policy statements are clear evidence that US government decision-makers understand the current global energy crisis which has been exacerbated by Russia's war against Ukraine," said Fred Hutchison, president of LNG Allies. 

Welcoming the increased recognition of the role for US LNG in global energy security, the Center for LNG said it looked forward to efforts to streamline the regulatory process. 

"The LNG industry can build, but regulators must do their part to help expedite the essential infrastructure that is needed here and in Europe to meet these ambitious goals and help our European allies," Charlie Riedl, executive director of CLNG, said in a statement.  

FERC Chairman Richard Glick March 25 reiterated his view that LNG plays a geostrategic role around the world. 

"Although the commission is an independent regulatory body, it will, as always maintain procedures that allow for expeditious case-by-case review for LNG export terminals," he said in a statement.

Export capacity

The US exported 21.7 Bcm to EU countries in 2021, according to data from S&P Global Commodity Insights. The main buyers were Spain (5.3 Bcm), the Netherlands (4.6 Bcm) and France (4.2 Bcm), the data showed. A further 8.7 Bcm of US LNG went to non-EU members Turkey and the UK last year.

The US has growing LNG export capacity and is seen as a stable partner for the EU in terms of future energy supply, with the EC saying in a statement that it would "work with EU member states toward ensuring stable demand for additional US LNG until at least 2030 of approximately 50 Bcm/year."

The Biden administration said it has identified the sources needed to reach the 15 Bcm target for additional supply to Europe this year.

US National Security Advisor Jake Sullivan pointed to three recent efforts aimed at increasing near-term supplies: the March 16 approval of expanded export authorizations; a White House-led strategy to divert cargoes from other destinations to Europe, which he said would continue for the rest of the year; and Biden staying "personally engaged" with top gas suppliers including Qatar, "who have been able to step up."

"So when you put all those pieces together, we feel quite confident that we'll hit our mark," Sullivan said during a March 25 briefing.

Of the four US LNG facilities that are currently under construction, Golden Pass LNG, Plaquemines LNG, and Corpus Christi LNG Stage 3 still likely have un-fixed volumes available to contract to European buyers, according to S&P Global data.

Questions remain about how the timeline for ensuring demand for US LNG until 2030 could be used to backstop new US export capacity. US LNG terminals have traditionally been backed by 20-year contracts, and the repayment period has typically exceeded 10 years.

In the short-term, Goldman Sachs predicted limited-to-no impact to domestic US gas fundamentals over the next two or three years.

Climate concerns

Biden's remarks that the joint task force would align with his green agenda and commitments to work to reduce overall demand for gas and reduce GHG intensity of all new LNG infrastructure and associated pipelines did not quell concerns from environmental groups.

Kelly Sheehan, Sierra Club senior director of energy campaigns, warned that "allowing for the expansion of new and expanded gas export facilities would lock in decades of reliance on risky, volatile fossil fuels."

"Europe needs more US LNG to get through the next two winters, not incentivization to use gas for the next 20 years," Claire Healy, head of climate think tank E3G's Washington's office, said. "It has turned a short-term energy crunch into a long-term crutch for American oil and gas producers."

Noting commitments made in Glasgow last year to end public finance for fossil fuels by the end of 2022, Laurie van der Burg, global public finance co-manager at Oil Change International, said, "Rather than backsliding and committing new public finance to unnecessary and polluting projects, the only effective response to the current moment is accelerating this agenda and doubling down on public finance and subsidies for the energy efficiency and renewable solutions that can significantly reduce gas use in the short-term." 

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