The EU's pledge to purchase $250bn/yr worth of US energy is unattainable, writes Isabel Valverde Sala
In its bid to secure a trade deal with the US, the European Commission agreed to nearly triple its purchases of US energy — with the bulk of the additional receipts in the form of LNG. But at current prices, this would equate to volumes that neither the EU is able to absorb nor the US is able to produce.
The deal envisages the bloc's purchases of US crude, LNG, nuclear fuels and fuel services rising to $250bn/yr over the next three years, from $90bn-100bn in 2024, alongside an EU commitment to make new investments of $600bn in the US — all in return for a reduction of the US government's levy on imports from the EU to 15pc, instead of the previously mooted 30pc. The commission insists that the deal is "achievable", pointing to increased US LNG deliveries as it frames the deal as a means to accomplish its goal of phasing out all Russian fossil fuels imports by 2027. But at any prevailing gas price for the coming three years, the target EU expenditure in US energy would translate into a volume not only greater than residual Russian imports, but also higher than physical capacities on both sides of the Atlantic.
The Argus Gulf coast US LNG fob price, which reflects spot prices on the international market, averaged $12.09/mn Btu in January-July. Even assuming the EU would be paying a spot price for US LNG, it would need to buy about 507bn m³ of gas in order to spend $250bn/yr. And with a wave of new LNG export capacity set to come on line in the coming years, forward gas prices are in backwardation, meaning the quantity needed to comply with the deal's terms would gradually increase over time. The TTF 2026, 2027 and 2028 contracts were assessed at $11.73/mn Btu, $10.61/mn Btu and $9.45/mn Btu, respectively, on 5 August.
But the bulk of US LNG is sold on a long-term basis on a price linked to the US Henry Hub, which is typically much lower than prevailing gas prices in Europe and Asia. The US average LNG export price was $6.59/mn Btu in 2024, much closer to the long-term price at which most US LNG is sold. At this price, the target expenditure of $250bn/yr would equate to 930bn m³ of gas — more than three times higher than the EU's consumption, which was just short of 300bn m³ in 2024.
Furthermore, total US liquefaction capacity stands at roughly 117mn t/yr at present, equivalent to about 150bn m³/yr of gas. This may increase to 212mn t/yr, or 272bn m³/yr of equivalent pipeline gas, by the end of 2028, although this would imply the swift commissioning of several projects that have yet to reach a final investment decision. By contrast, residual Russian gas imports into the EU, including pipeline gas and LNG, stood at 151mn m³/d in January-July, after transit flows through Ukraine halted at the start of this year. At this rate, they could reach just under 23bn m³ in the whole of 2025.
A bridge too far
The scale of the mismatch would be impossible to bridge, even including other energy imports. But there are also limitations to increasing EU receipts of the predominantly light sweet crude exported by the US, as the bloc already produces plenty of the refined products obtained, and many European refineries are designed to distillate medium sour values instead.
It remains unclear how the commission can drive commercial choices by private firms. For now, "what the commission can do, and has been doing, is talk to energy companies and EU industries to see what their intentions are in the coming years", EU trade spokesperson Olof Gill says. The idea of utilising the AggregateEU platform to facilitate joint purchases of US LNG was also floated, although further information "will have to come when we move close to hashing out the details", EU climate and energy spokesperson Anna-Kaisa Itkonen says.
