Why US Gas Won’t Solve Europe’s Energy Crisis

The war in Ukraine has fueled a boom in U.S.-produced liquefied natural gas exports, but sanctions have prevented it from making up for lost supplies from Russia. In addition, climate goals have taken a back seat. Demand for liquefied natural gas (LNG) volumes is at an all-time high, as the European Union (EU) has reduced its purchases of Russian gas in response to its invasion of Ukraine. The United States is now the world’s largest exporter of natural gas, but political, economic and technological limitations prevent it from rushing to Europe’s rescue. Although the sector is in full expansion, lack of export capacity continues to hamper supplies to Europe and the rest of the world. Meanwhile, environmentalists insist that the rapid growth of LNG exports is a destructive way of dealing with the energy crisis and point out that there are other conceivable solutions to achieving global climate goals. “It’s a dangerous path in terms of our energy needs and our climate,” says Robin Schneider, executive director of the US-based NGO Campaign for the Environment in Texas. Natural gas prices have risen as the energy crisis in Europe has restricted the flow of Moscow pipelines and the European Union has moved to reduce its reliance on Russian gas. Prices surged 25% last week after Russia announced that its Nord Stream 1 pipeline to Germany would deliver only 20% of its normal capacity. In May, the country had already responded to European sanctions by completely halting the flow of gas to Europe through the Yamal pipeline. European countries are scrambling to stockpile enough gas as winter approaches. In addition to fears that the energy crisis could trigger a recession, there are fears of an eventual rationing of heating for homes and use by industry and corporations. The continent depends on natural gas for domestic heating, electricity generation and industrial operation. Several countries, such as Germany, which is increasing subsidies for public gas utilities, and France, which announced the full nationalization of energy company EDF, are taking steps to help households and businesses pay the bill. America to the rescue? According to the US Energy Information Administration (EIA), in the first half of 2022, the US cemented its position as the world’s largest LNG exporter. The country’s average daily exports rose 12% over the past six months to 11.2 billion cubic feet per day (bcf). The UK and EU received 71% of those exports, replacing Asia as the main importer of US LNG – and paying more for the fuel. Countries like Brazil and Bangladesh are unable to compete with Europe in terms of procurement. Some exporters have cut deals with developing countries and diverted fuel to Europe, reaping huge profits despite the penalties. According to Eugene Kim, director of research at consultancy Wood Mackenzie, the US has emerged as one of the only reliable suppliers of LNG. Prior to the Russian invasion of Ukraine, the Australian and West African gas industries were facing political and economic problems. “Only Qatar and North America will grow in LNG supply in the future,” Kim told DW. But logistical problems on both sides of the Atlantic limit America’s ability to meet European demand. US President Joe Biden promised more LNG exports to Europe in March, but the US sector is already on edge. Also, due to Russia’s dependence on pipelines, much of Europe lacks adequate import infrastructure, even if the US proves capable of exporting more LNG. In the short term, LNG exports from the US are expected to drop significantly due to the explosion that damaged the Freeport LNG terminal in Texas in June, which accounts for 20% of US gas exports. However, the US lacked the capacity to supply Europe prior to the incident at the Texas plant. “Before the Freeport LNG explosion in early June, US LNG exports had already reached full capacity,” Kim said. “Even assuming everything works as per 2023, we will still be at a maximum of 12 bcf per day. There is no new project in the short term that can significantly increase our LNG exports,” he added. Existing capacity is mostly tied to long-term contracts with non-European countries, and the next round of building export infrastructure is not expected to be ready until 2024 or later. However, Kim points out that there may not be enough capacity to supply Europe. In addition to capacity constraints, U.S. business and consumer groups are impatient with higher prices, and U.S. LNG exports are on the rise. Paul Ciccio, executive director of the Industrial Energy Consumers Association of America, told the Wall Street Journal that “the American consumer, the American economy, and American national security are at risk if we don’t maintain high inventories.” In fact, prices have risen due to increased use of air conditioning during recent heat waves, making up for the loss of demand caused by the explosion at the Freeport facility, which has forced the United States to export gas. The EIA recently reported that US inventories were 12% below the previous five-year average this year. Climate targets that set aside U.S. gas are also fueling opposition from environmentalists. Climate advocacy groups say expanding LNG infrastructure needed to boost exports would mean abandoning goals to reduce fossil fuel emissions. “A major concern is that LNG export companies are using [a crise energética da Europa] “It’s an excuse to try to rush new export terminals and permits to avoid air pollution laws,” said Schneider of the Texas Campaign for the Environment. Activists point out that LNG is responsible for a third of the carbon and nearly half of the methane. One of the culprits is methane, a particularly potent greenhouse gas released by fracking. Research shows that natural gas extraction and liquefaction processes are extremely dangerous and polluting. In addition, methane can release carcinogenic and harmful chemicals into the environment around fracking facilities. The liquefaction process is subject to fires and explosions, located at the Freeport, Texas facility. The Freeport Terminal explosion is an example of “why one is also dangerous. “We’re afraid it could have been worse.” Despite climate risks, the EU has moved to add natural gas to its sustainable energy list, and US gas exporters have signed several agreements to meet some European requirements. According to Kim, there has been a shift in Europe’s energy priorities. “Energy transition used to be the dominant theme, but now energy security is starting to replace it.” For example, Schneider believes that Europe can invest heavily in renewable energy and pursue a cleaner path. New US LNG export facilities will not help the situation for another three years, he said, adding that Europe “can use this crisis to implement a transition to more sustainable fuels”. Author: Teddy Astro

Questions, criticisms and suggestions? Talk to us