Categories: News latest

U.S. to Boost Gas Deliveries to Europe Amid Scramble for New Supplies

The U.S. is ramping up shipments of liquefied natural gas to Europe this year as the continent mounts a worldwide hunt for new supplies to phase out its reliance on Russian energy after the invasion of Ukraine.

The globe-spanning effort to wean Europe off Russian energy supplies was at the center of President Biden’s summit with European Union leaders this week in Brussels. The U.S. aims to ship 50 billion cubic meters of LNG to Europe annually through at least 2030, officials said Friday, making up for about a third of the gas the EU receives from Russia. The EU imported a record 22 billion cubic meters of LNG from the U.S. last year.

The boost in U.S. gas deliveries goes only part of the way in covering the shortfall Europe faces in turning away from Russian gas. Officials across the continent are racing to sign new contracts with producers in the Middle East and Africa before next winter. France has ended subsidies for new gas heaters in homes and will instead subsidize electric heat pumps. Italy, the second-largest consumer of Russian gas after Germany, is considering burning coal at some power plants rather than natural gas.

On Friday, U.S. and EU officials said they are aiming to supply the 27-nation bloc with an additional 15 billion cubic meters of LNG, using cargoes from the U.S. and elsewhere.

Western nations want to end the leverage Russia holds over Europe as the continent’s most important energy supplier and cut a lifeline for the Russian economy. Natural gas presents the biggest problem for Europe, because the fuel is much harder than oil and coal—Russia’s other main energy exports to Europe—to import by boat from other suppliers. Gas that doesn’t travel through massive pipelines—such as the Nord Stream 2 project that Germany recently suspended—must be cooled to a liquid, shipped on a tanker and then re-gasified at special facilities.

Commodity prices are hot right now. But the prices investors are paying in the open market for commodities like coffee, copper or corn can have little to do with the price customers pay at the store. WSJ’s Dion Rabouin explains. Illustration: Adele Morgan

“Eliminating Russian gas will have costs for Europe,” Mr. Biden said Friday. “But it’s not only the right thing to do from a moral standpoint, it’s going to put us on a much stronger strategic footing.”

The plan to end Europe’s consumption of Russian gas will take at least several years. Countries that produce LNG are running their export terminals at full capacity, and building new ones takes time. Shifting away from gas produced by Russia—the region’s low-cost producer—is expected to put upward pressure on Europe’s energy bill, at least in the short term before new sources of renewable energy such as wind and solar come online. The European Commission, the EU’s executive arm, has said it wants to slash Russian gas imports by two-thirds this year.

The U.S. is the world’s largest natural-gas producer, and in January and December, it was the largest exporter of LNG. Nearly 70% of those LNG shipments went to the 27 nations of the EU, the U.K. and Turkey.

“We are exporting right now every molecule that has a terminal available to liquefy it,” said

U.S. Energy


Jennifer Granholm.

“Because of the price, there is a desire to liquefy it and send it.”

Anatol Feygin,

chief commercial officer at

Cheniere Energy Inc.,

the largest U.S. LNG exporter, said around 70% of the LNG produced at the company’s facilities is being shipped to Europe by its customers. Though Europe has attracted greater volumes of U.S. LNG than Asia this year, there is little that market participants can do to send more toward Europe, he said.

“Everybody asks what can you do in the short run to get more volume into Europe, and the only answer is to run our facilities as well and as reliably as possible,” Mr. Feygin said. “There’s no silver bullet that makes an additional [LNG] train appear,” he added, referring to key facilities that chill natural gas to a liquid state.

The U.S. says its LNG export capacity will grow another 20% by the end of the year. The EU in January imported 4.4 billion cubic meters of LNG from the U.S., a record. But that is only a fraction of the 155 billion cubic meters of gas that Europe imported from Russia last year—45% of its total imports.

To help close the gap, Europe is stocking up on natural gas from other producers such as Algeria and Qatar. It is also moving to tamp down demand for the fuel, by cutting subsidies for gas heaters and possibly restarting coal-burning plants that had been closed to cut Europe’s greenhouse-gas emissions. The high price of natural gas has already pushed Germany and other countries to run their coal-burning plants harder since last year.

Germany, the world’s largest importer of Russian gas, has been scrambling to find new supplies. This month, authorities signed an agreement to build the country’s first LNG facility, and they have announced plans to build a second one. Germany this week reached an energy agreement with Qatar, without disclosing the size of the supplies.

Germany’s plans for new LNG terminals and options on the delivery from non-Russian suppliers should allow it to end Russian gas imports by 2024, German Economy Minister

Robert Habeck

said Friday.

A separate plan to shut down Germany’s last three nuclear reactors by the end of this year, part of a yearslong effort to exit nuclear power, is likely to result in more natural gas being consumed to generate electricity, analysts say. Germany has said it would be unsafe to keep the reactors operating past the end of the year.

France, which is less reliant on Russian gas due to its large nuclear power industry, is ending subsidies for new gas heaters in homes and will instead subsidize electric heat pumps.

LNG storage tanks at a terminal, operated by Polskie LNG SA, in Swinoujscie, Poland.


Bartek Sadowski / Bloomberg News

Poland, a large consumer of natural gas, plans to stop buying the fuel altogether from Russia at the end of this year. That is when its contract with Russian energy giant Gazprom expires. It will make up the difference with LNG imports from the U.S. and elsewhere, and gas through new pipelines from other European countries, including one from Norway that is set to come online later this year.

“If there are sanctions that happen today on gas, we are ready to function without Russian gas because we’ve got storage,” Anna Moskwa, Poland’s minister of climate and environment, said in an interview.

Poland has been among Europe’s most forceful advocates of imposing sanctions on Russian gas, coal and oil, even though 50% of its gas supplies comes from Russia. Poland has been preparing for years to end its dependence on Russian energy, spurred by Moscow’s annexation of Crimea in 2014.

“It was already kind of an energy gas war between Europe and Russia,” Ms. Moskwa said.

Italy has cleared the way to burn more coal by reactivating coal-fired power plants it had shut years ago to cut greenhouse-gas emissions. But such a move would raise Europe’s carbon-dioxide emissions, complicating the continent’s plans to fight global warming. Firing up idled coal-burning could save Italy up to 4 billion cubic meters of gas a year. Italy generates around 85% of the electricity it needs and imports the rest from other European countries, mainly France.

Over the past decade, Italy’s gas consumption has been stable at 76 billion cubic meters a year. Its national gas production has dropped to 3 billion cubic meters, from around 8 billion cubic meters over the same period, mainly due to the drop in the gas available in domestic fields.

The result is that Italy imports around 96% of the gas it needs. Over the past decades, imports from Russia have risen to 38% of Italian national consumption, from 25%.

Since Russia launched its invasion of Ukraine, Italian Foreign Minister

Luigi Di Maio

has been on a whirlwind tour to find more gas suppliers, meeting with the governments of Algeria, Angola, Congo and Qatar. He secured an additional annual supply of around 17 billion cubic meters, more than half of which would come from Algeria through a pipeline between the countries.

The additional Algerian gas will start to flow to Italy this summer. The rest will come from Qatar, Angola and Congo as LNG. Currently, Italy can process an additional 6 billion cubic meters of imported LNG to reach the maximum capacity of its existing three re-gasification terminals, which normally process around 10 billion cubic meters of LNG.

Italy’s government asked state-controlled gas company


to discuss the acquisition of a floating storage and re-gasification facility and to lease a second one. The country plans to expand its re-gasification capacity by up to 24 billion cubic meters through the use of floating facilities, but it will take at least a year to do so.

Italian Foreign Minister Luigi Di Maio has been on a whirlwind tour to find more gas suppliers.


riccardo antimiani/Shutterstock

Last week, Mr. Di Maio also secured an additional supply of LNG from Mozambique.

It would take Rome three years to fully replace Russian gas, the government said last week. Italy would cope until the end of October with the current stock and the initial flow of the additional supplies it recently secured.

From next winter, it could resort to the rationing of gas among Italian companies if Russian gas supplies stopped, Italian Ecological Transition Minister

Roberto Cingolani

said last week. However, the government considers that an extreme scenario, to which it nonetheless has to prepare.

“We can’t be so dependent on the decisions of a single country. Our liberty is at stake, not just our prosperity,” said Italian Prime Minister

Mario Draghi.

Write to Matthew Dalton at and Giovanni Legorano at

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

News in Association with Source link

Related Post