Why the US can’t quickly separate Europe from Russian gas

HOUSTON— President Biden announced Friday that the United States would send more natural gas to Europe to help it break its dependence on Russian energy. But that plan will be largely symbolic, at least in the short term, because the United States does not have the capacity to export more gas and Europe does not have the capacity to import much more.

In recent months, US exporters, with the support of President Biden, have already maximized the production of terminals that convert natural gas into liquid ships easily in large tanker trucks. And they have diverted shipments originally destined for Asia to Europe.

But energy experts said building enough terminals on both sides of the Atlantic to significantly expand US exports of liquefied natural gas, or LNG, to Europe could take two to five years. That reality is likely to limit the scope of the natural gas supply announcement that Biden and European Commission President Ursula von der Leyen announced on Friday.

“In the short term, there are really no good options other than begging one or two Asian buyers to give up their LNG tanker for Europe,” said Robert McNally, who was an energy adviser to former President George W. Bush. But he added that once enough gas terminals are built, the United States could become the “energy arsenal” that helps Europe break its dependence on Russia.

Friday’s agreement, which calls on the United States to help the European Union secure an additional 15 billion cubic meters of liquefied natural gas this year, could also undermine the efforts of Mr. Biden and European officials to combat climate change. Once new export and import terminals are built, they will likely continue to operate for several decades, perpetuating the use of a fossil fuel far longer than many environmentalists consider sustainable for the well-being of the planet.

For now, though, climate concerns seem to be taking a back seat, as American and European leaders seek to punish President Vladimir V. Putin of Russia for invading Ukraine. depriving it of billions of dollars in energy sales.

The United States has already substantially increased energy exports to Europe. So far this year, nearly three-quarters of USLNG has gone to Europe, up from 34% for all of 2021. As natural gas prices have soared in Europe, US companies have pulled out all the stops to send more gas there. The Biden administration has helped by getting buyers in Asian countries such as Japan and South Korea to forego LNG shipments in order to send them to Europe.

The United States has plenty of natural gas, much of it in shale fields from Pennsylvania to the Southwest. The gas bubbles up from the ground with oil from the Permian Basin, which straddles Texas and New Mexico, and producers are gradually increasing their output of both oil and gas after sharply reducing production in the first year of the pandemic, when energy prices collapsed.

But the big problem with sending more energy to Europe is that natural gas, unlike crude oil, cannot easily be put on ocean-going ships. First, the gas must be cooled in a costly process at export terminals, primarily on the Gulf Coast. The liquid gas is then poured into specialized tankers. When the ships arrive at their destination, the process runs in reverse to convert the LNG back into gas.

A large export or import terminal can cost more than a billion dollars, and planning, obtaining permits, and completing construction can take years. There are seven export terminals in the United States and 28 large-scale import terminals in Europe, which also sources LNG from suppliers such as Qatar and Egypt.

Some European countries, including Germany, until recently were not interested in building LNG terminals because it was much cheaper to import gas by pipeline from Russia. germany is now revives plans to build its first LNG import terminal on its north coast.

“Europe’s need for gas far exceeds what the system can supply,” said Nikos Tsafos, an energy analyst at the Center for Strategic and International Studies in Washington. “Diplomacy can only do so much.”

In the longer term, however, energy experts say the United States could do a lot to help Europe. Together with the European Union, Washington could provide loan guarantees for US export and European import terminals to cut costs and speed construction. Governments could require international lending institutions such as the World Bank and the European Investment Bank to make natural gas terminals, pipelines and processing facilities a priority. And they could ease regulations that gas producers, pipeline builders and terminal developers say have made it harder or more expensive to build gas infrastructure.

Charif Souki, chief executive of Tellurian, a US gas producer that plans to build an export terminal in Louisiana, said he hoped the Biden administration would streamline permitting and environmental reviews “to make sure things happen.” quickly without micromanaging everything.” He added that the government could encourage banks and investors, some of whom have recently eschewed oil and gas projects in an effort to burnish their climate credentials, to lend for projects like his.

“If all the major US banks and major institutions like BlackRock and Blackstone are comfortable investing in hydrocarbons, and they are not going to be criticized, we will develop the $100 billion worth of infrastructure that we need,” Souki said.

A handful of export terminals are under construction in the United States and could increase exports by about a third by 2026. About a dozen US export terminal projects have been approved by the Federal Energy Regulatory Commission, but they cannot go forward until they get financing from investors and lenders.

“That’s the bottleneck,” Tsafos said.

Roughly 10 European import terminals are under construction or in the planning stages in Italy, Belgium, Poland, Germany, Cyprus and Greece, but most have yet to have their financing lined up.

Russia provides about 40 percent of Europe’s gas, and its biggest customers tend to be in Eastern and Central Europe. Some countries have developed LNG import capacity, but much of it is in southern Europe, which is not well connected by gas pipelines to countries to the north and east.

A month after the war in Ukraine, Russian gas shipments to Europe have remained relatively stable, but that could change. Mr Putin suggested on Wednesday that countries hostile to Russia should be required to pay for your energy in rubles instead of euros or dollars. That would force European companies to deal with Russian banks that have been sanctioned by Western governments.

There are some signs that European businesses and individuals may cut back on natural gas use in part because it has become so expensive. For example, Yara International, a major fertilizer manufacturer in Italy and France, has said it would cut production due to high costs of raw materials such as natural gas.

While reducing demand would help, some climate scientists and activists are concerned that the focus of the Biden administration and the European Union on building LNG terminals could deal a serious blow to the effort to address global warming by encouraging the use of fossil fuels.

“There is a risk of locking in 20 or even 30 years of emissions from export infrastructure at a time when you really need to reduce your overall emissions,” said Clark Williams-Derry, a senior fellow at the Institute for Energy Economics and Finance. Analysis, a research organization.

Jason E. Bordoff, co-founding dean of the Columbia University School of Climate and a former energy adviser to President Barack Obama, said the Biden administration could encourage more gas shipments to Europe while promoting cleaner alternatives such as wind and solar power.

“In the longer term, US government financial tools and diplomacy can help accelerate Europe’s transition to clean energy to reduce reliance on inevitably volatile hydrocarbons,” he said.

Some promoters of natural gas exports say the fuel could help Europe meet climate goals by displacing the use of coal in power plants. Burning coal releases more greenhouse gases than burning gas.

Gina McCarthy, Biden’s senior climate change adviser, said Thursday that the administration intends to “balance” what it called a “short-term emergency solution” to help Europe tackle climate change.

“We cannot increase our dependence on fossil fuels,” Ms. McCarthy told a group of renewable energy executives. “We are making clear distinctions even in our talks with the European Union.”

Lisa Friedmann contributed reporting from Washington.

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