The US and EU today backed a plan under which Europe will cut its dependence on Russian gas by supporting the buildout of more US LNG capacity, alongside short-term plans for the US to help find an additional 15bn m³ of natural gas for the EU market this year.
US president Joe Biden announced the plan today in Brussels alongside European Commission president Ursula von der Leyen. The agreement envisions Europe becoming by far the largest consumer of US LNG. The US would support Europe's goal by "working with international partners" to find more gas in the short-term, while also expediting permitting to construct a new wave of US LNG projects.
The commission will work with EU member states to ensure "stable demand" of an additional 50bn m³/yr (4.8 Bcf/d) for US LNG until at least 2030, a volume of gas equivalent to about half of US LNG exports last year. The commission will also support long-term contracting mechanisms needed to expand liquefaction capacity in the US, along with new import infrastructure in Europe.
Many European countries typically take 25-60pc of their annual gas imports from Russia's state-controlled Gazprom. The EU has already set a target to cut Russian gas imports by two thirds by the end of 2022, in response to Moscow's decision to send troops into Ukraine a month ago.
"We aim to reduce this dependency on Russian fossil fuels and to get rid of it," von der Leyen said. "And this can only be achieved through, first of all, investment in renewables, but also through additional gas supplies, including LNG deliveries."
Biden said eliminating the use of natural gas from Russia will have costs for Europe but argued the shift is the "right thing to do from a moral standpoint," while also improving strategic positioning.
The White House has been in talks with LNG exporters and buyers around the globe for months to determine whether they could increase output or divert cargoes to Europe. The US today pledged to "strive" to ensure the extra 15bn m³ of gas for Europe this year, including by working with international partners, but it did not elaborate. Existing US LNG facilities have been running near peak capacity for months.
"We are going to have to make sure that families in Europe can get through this winter and the next, while we are building infrastructure for diversified, resilient and clean energy future," Biden said.
The US under the agreement will have an "enabling" regulatory environment to quickly permit any additional LNG export capacity. But federal regulators have already given final approval to more than a dozen large US LNG projects, most on the US Gulf coast, capable of exporting more than 20 Bcf/d. Those projects have been held up largely by a lack of financing and long-term contracts, rather than regulatory constraints.
The new agreement comes less than a day after US Federal Energy Regulatory Commission (FERC), an independent agency, reversed course on a one-month-old policy that would have substantially tightened permitting requirements for building new pipelines and LNG export facilities in the US. FERC initially planned for the policy to apply to all projects awaiting approval, but it voted 5-0 on 24 March to treat the policy as "draft" and only impose tougher permitting rules to future projects.
The US and EU under the agreement have pledged to cut the carbon-intensity of all new LNG infrastructure and pipelines, largely by reducing methane leakage and making the infrastructure "hydrogen-ready." They also intend to come up with ideas to reduce overall gas demand, such as expediting renewable energy, installing heat pumps and advancing the production of "clean" hydrogen.
But environmentalists have argued a dramatic expansion of US LNG export capacity is incompatible with Biden's climate goals, including a pledge under the Paris climate accord to cut greenhouse gas emissions by 50pc from 2005 levels by 2030. Expanding gas exports would "lock in decades of reliance on risky, volatile fossil fuels and spell disaster for our climate," Sierra Club senior director for energy campaigns Kelly Sheehan said.
US gas industry officials applauded the agreement but said they needed regulatory certainty from the Biden administration to meet the targets set out by the deal.
"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," Center for LNG executive director Charlie Riedl said.
