The United States announced a deal with European leaders on Friday to boost natural gas shipments to help Europe wean itself off Russian energy. AND Germany set an ambitious goal of halving its Russian oil and coal imports this year and weaning itself off its dependence on Russian natural gas by mid-2024.
Germany’s timetables, outlined by its vice chancellor, are a remarkable turnaround for Europe’s largest economy, which has long relied heavily on Russia for energy. Just a few months ago, Germany was still aiming to buy even more natural gas from Moscow through a new pipeline called Nord Stream 2.
But President Vladimir V. Putin’s invasion of Ukraine has forced the leaders of Germany and other European countries to rip out the energy playbook they had used for years, even decades, in just one month. German Vice Chancellor Robert Habeck told a briefing in Berlin that his country was moving away from Russian energy at an “insane pace.”
President Biden is trying to encourage similar moves by other European countries, in part by offering the United States as an energy supplier.
The deal he announced, in Brussels on Friday, lacked many details but contained some important goals: The United States would send an additional 15 billion cubic meters of liquefied natural gas to Europe this year, roughly 10 to 12 percent of exports. current annual reports from the US to all countries. By 2030, the president said, the United States will try to increase supplies by as much as 50 billion cubic meters a year.
The moves caught many in the US energy industry by surprise. Oil and gas executives who have grown accustomed to being ridiculed for their contributions to climate change were suddenly called upon to help rid European allies of Russian energy. While the industry wasn’t sure how Europe would pull off such a big turnaround, executives clearly enjoyed their newfound choice as saviors rather than villains.
“I have no idea how they are going to do this, but I don’t want to criticize them, because for the first time they are trying to do the right thing,” said Charif Souki, chief executive of Tellurian, a US company. gas producer that plans to build an export terminal in Louisiana.
Biden and European Commission President Ursula von der Leyen said many of the details would be worked out by a task force dedicated to reducing Europe’s dependence on Russian oil and gas in ways that would not undermine the country’s climate policies. . two partners
Among the things they did not address was the shortage of port capacity to send and receive more gas on both sides of the Atlantic. The effort could also run into trouble because the Biden administration cannot simply order US exporters to sell gas to European buyers or set prices acceptable to those buyers.
“We are going to have to make sure that families in Europe can get through this winter and next as we build infrastructure for a clean, resilient and diversified energy future,” Biden said.
The European Union relies heavily on energy imports from Russia, a major producer of oil, diesel, coal and, perhaps most importantly, natural gas. That dependency has become a growing problem as the European Union seeks to punish Putin. Russia provides about 40 percent of Europe’s natural gas, with a significant portion being shipped by pipeline through Ukraine.
Germany has long been one of Russia’s biggest customers. Having decided to shut down its nuclear plants, Germany is increasingly dependent on natural gas. Because it obtained relatively affordable pipeline gas from Russia, and some from the Netherlands, Norway and other suppliers, it refused to build terminals where LNG could be imported.
Germany also imports nearly a third of its crude oil from Russia. It has been trying to reduce its consumption with generous subsidies for electric cars and greater investment in public transport.
The Ukraine war has accelerated such German efforts under Foreign Minister Olaf Scholz, who heads a coalition government made up of conservatives, liberals and environmentalists. Germany has this year revived plans to build gas import terminals and has suspended final approvals of Nord Stream 2a nearly complete pipeline that would have fed it a steady supply of Russian gas.
“Every supply contract that is terminated harms Putin,” Habeck said on Friday.
Later that day, the EU countries agreed to buy and store natural gas jointly. They set a goal of filling 80 percent of their underground gas storage facilities by November to hedge against supply disruptions during the winter, when gas use for heating increases.
In the United States, gas exporters were already shifting sales to Europe from Asia in recent months, largely because prices in Europe have been higher than almost anywhere else in the world due to rising tensions with Russia and , more recently, the war in Ukraine. Nearly 75 percent of USLNG exports have gone to Europe so far this year, up from 34 percent in 2021. The Biden administration has encouraged that shift by relaxing export restrictions to certain European countries.
Charlie Riedl, executive director of the Center for Liquefied Natural Gas, a trade group, said he thought an additional 15 billion cubic feet of US gas exports to Europe could be achieved relatively easily. He said two-thirds of that total could come from diversion of shipments otherwise destined for Asia, with the rest coming from recent federal approvals for additional production from existing US LNG export terminals.
“Obviously it is a positive sign that Europe is trying to stop using Russian gas,” Riedl said.
Energy executives say the Biden administration could help increase the flow of gas by simplifying permits for new U.S. export terminals, where natural gas is cooled to a liquid and pumped into tankers at high altitude. sea. Washington and the European Union could also provide loan guarantees for US export terminals and European import terminals. There are about a dozen US export terminals that have obtained regulatory approval but need financing to build. Some 10 European import terminals are under construction.
Executives complain that it can take longer to get permits for pipelines and export terminals than to build them.
The export terminals require investments of up to 10 billion dollars, while the construction of import terminals costs around 1 billion dollars. The United States has seven export terminals and Europe has 28 large-scale import terminals.
Environmentalists have criticized Biden’s announcement because they fear it will commit the United States and Europe to using fossil fuels for decades longer than they argue is sustainable given the mounting toll of climate change.
“There is no way to increase USLNG exports and meet the imperative climate commitments that the US and EU have promised,” said Abigail Dillen, president of Earthjustice, an environmental law organization. She warned that the buildup of LNG infrastructure “would lock in costly fossil reliance and dangerous pollution for decades to come.”
US and European officials also agreed to look for ways to decrease greenhouse gas emissions from LNG infrastructure and pipelines and reduce the release of methane from gas operations. They said they would accelerate energy efficiency initiatives, such as the deployment of heat pumps and the use of clean hydrogen technologies to displace fossil fuels, as well as accelerate the planning and approval of renewable energy projects such as offshore wind and solar power. .
The Biden Administration has banned imports of Russian energy as part of a package of sanctions against Putin, a relatively easy step for the United States because it is a net exporter of energy. Some US lawmakers would like to see the European Union stop buying oil and gas from Russia altogether, but several EU leaders have ruled out the possibility of that happening, seeing it as a financially disastrous step that it would hurt Europe more than Russia.
Some energy experts said further escalation of the war, such as Putin’s decision to use chemical, biological or nuclear weapons, could leave the European Union with no choice but to ban Russian energy purchases.
“As Europeans, we want to diversify away from Russia, towards suppliers that we trust, that are friends and that are trustworthy,” Ms. von der Leyen, of the European Commission, said in the ad with Biden. “Therefore, the US commitment to provide the European Union with at least an additional 15 billion cubic meters of LNG this year is a big step in this direction, because it will replace the supply of LNG that we currently receive from Russia. ”.
Still, oil and gas executives said Biden and von der Leyen would have to be patient and recognize that decisions about who sold gas to whom would be made by private companies, not politicians, at the bargaining tables. Ultimately, exporters will seek to sell their gas to buyers willing to pay the highest price.
“This is a capitalist system,” said Souki, the Tellurian executive. “It’s people like me who make those decisions. The government cannot tell us where to send the gas.”
The report was contributed by Matina Stevis-Gridneff, Christopher F. Schuetze, Monika Pronzuk and Zolan Kanno Youngs.