U.S. LNG exports soar as Europe scrambles to fill gap left by Russian cutback

U.S. LNG exports soar as Europe scrambles to fill gap left by Russian cutback

Energize Weekly, June 15, 2022

Exports of U.S. liquified natural gas (LNG) to Europe soared in the first four months of 2022 and are poised to grow even more as the European Union (EU) scrambles to replace supplies from Russia.

The U.S. exported 74 percent of its LNG to Europe in the first four months, an average of 11.5 billion cubic feet per day and a 34 percent increase over the same period in 2021, according to the federal Energy Information Administration (EIA).

That is only the beginning of a ramp-up in exports as Europe tries to wean itself from its prime supplier, Russia, in the wake of the Russian invasion of Ukraine.

“Since December 2021, the European Union and the United Kingdom have been importing record-high levels of LNG, primarily because of low natural gas storage inventories,” the EIA said. “High spot natural gas prices at the European trading hubs incentivized global LNG market participants with destination flexibility in their contracts to deliver more LNG supplies to Europe.”

In March, the Biden administration and the EU formed an energy security task force aimed at replacing Russian natural gas supplies and guaranteeing at least 15 billion cubic meters (bcm) of natural gas exports to Europe this year, rising to 50 bcm annually through 2030.

Since the Feb. 24 invasion of Ukraine, American LNG exporters have secured 19 agreements to supply 24 million tons a year of LNG, with at least a quarter of it headed to Europe, according to a report by the Environmental Integrity Project.

There is, however, a big hole to fill as Russia has been Europe’s major supplier shipping 155 bcm to the region in 2021. Russia was the world’s largest exporter of natural gas – 25 percent of global exports in 2020.

This has opened opportunities not only for the U.S. but other natural gas-producing countries.

Qatar has signed an export deal with Germany, and Egypt has one with Italy. Algeria has signed an agreement to export additional gas via pipeline to Italy. Canada plans to fast track new LNG projects to increase exports.

The buildup of export and import infrastructure is key to expanding the trade. Planned LNG import facilities in the EU – notably in Germany, Italy, Greece and the Netherlands – could boost capacity by 25 percent, according to Climate Action Tracker, an organization that tracks government measures impacting climate.

The boost in U.S. exports in 2022 was made possible by additional export capacity that came on online in late 2021 at the Sabine Pass and Calcasieu Pass LNG export terminals on the Louisiana coast, the EIA said.

Four new LNG export terminals are under construction in the U.S. and expected to begin operating by 2026 in Texas and Louisiana and nine additional projects – in Texas, Louisiana and Florida – have been permitted, but not yet started construction.

By the end of 2022, the EIA projects that the U.S. will have the world’s largest LNG export capacity with a peak of 13.9 billion cubic feet per day (Bcf/d), up from 11.6 Bcf/d in November 2021.

Twelve more LNG projects have been proposed for Alaska, Florida, Louisiana, Mississippi, New Jersey, Pennsylvania and Texas.

This buildup has alarmed environmental groups that worry these LNG investments will lock countries into burning natural gas far into the future, damaging efforts to curb the release of climate-altering greenhouse gases into the atmosphere.

“We are witnessing a global ‘gold rush’ for new fossil gas production, pipelines and liquefied natural gas facilities. This risks locking us into another high-carbon decade and keeping the Paris Agreement’s 1.5°C limit out of reach,” a Climate Tracker report said.

The Environmental Integrity Project calculated that the additional 25 LNG projects in the U.S. could increase annual greenhouse gas emissions by more than 90 million tons a year – more emissions than from 18 million gas-powered cars.

“Although there is pressure to hurry up approvals of these LNG projects, government regulators should be careful and thoughtful in considering their significant environmental impacts,” Alexandra Shaykevich, the integrity project’s research manager, said in a statement. “A dramatic increase in global dependence on LNG could be risky, from a climate perspective.”

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