White House move to delay new gas terminals worries Europe
LONDON: The Biden administration’s decision to delay approval of new liquefied natural gas terminals in the United States has been hailed as a major victory for environmental advocacy groups, but it is creating unease outside the United States about future energy supplies.
“I think US allies and trade partners will have some concerns about this, because in the past two years, US LNG exports have been a real boon to global energy security,” said Ben Cahill, a senior fellow in the energy security and climate change programme at the Center for Strategic and International Studies, a research institution in Washington.
The Biden administration’s move Friday to pause the permitting process for new liquefied natural gas export facilities is not expected to have an impact on global gas supplies soon. But it could create uncertainty, especially in Europe, which has only recently weathered a major energy shock after Russia’s invasion of Ukraine almost two years ago.
Interruptions of gas supplies from Russia in 2022 contributed to soaring energy prices in Europe, especially for electric power, that hurt businesses and consumers and pushed governments to spend heavily to ease energy bills. Tankers full of liquefied gas from the United States helped mitigate what could have been a dire situation.
Given this history, potential restrictions on gas supplies from the United States would be “a huge concern,” said Fredrik Persson, the president of BusinessEurope, the continent’s largest business group.
Over the past two years, an enormous surge in liquefied gas exports from the United States helped Europe largely replace flows of natural gas from Russia, which had been Europe’s mainstay supplier of the fuel. According to Kpler, a research firm, US gas exports to Europe more than doubled from 2021 to 2022, to about 52 million metric tonnes, and then increased modestly in 2023. These shipments have “been key in stopping Russia from forcing Europe down on its knees with using energy as a geopolitical weapon,” Persson said.
US exports of liquefied natural gas have grown from almost scratch in recent years. It is now the world’s largest LNG exporter, with more than 60% going to Europe last year. After the invasion of Ukraine, European countries including Germany, the Netherlands and Greece scrambled to build new LNG terminals and lock up supply deals with the United States. Doubts regarding the “stability” of liquefied gas supplies from the United States could put such plans at risk, “raising concerns of potential further price volatility,” Didier Holleaux, president of Eurogas, an industry group, said in a statement.
Germany’s Economy Ministry said Friday that it was monitoring the situation in the United States “closely” but declined to comment further. The security of the gas supply remains stable, the ministry said through a spokesperson, adding that Germany now receives most of its natural gas from Norway.
CURRENT EXPORTS EXEMPTED
In making this move, the Biden administration seems unlikely to jeopardise supplies to customers outside the US this year or anytime soon. The decision does not apply to current exports, and, analysts say, it will not stop new LNG projects that have already been approved and are under construction. These are likely to substantially boost the capacity of the United States to export gas in the coming years.
The administration said it wants time to determine whether additional LNG projects, ones still on the drawing boards, would be in the public interest. Such analysis would include weighing the greenhouse gas emissions that future projects would produce, as well as their impact on the economy and national security. In a statement, President Joe Biden said the pause on approvals “sees the climate crisis for what it is: the existential threat of our time.”
The Biden administration appears to be trying to reassure countries that have come to rely on US natural gas. This pause will “not impact our ability to supply our allies in Europe, Asia or other recipients of already authorised US exports,” the Department of Energy said Friday in a statement.
Analysts say that what may unsettle allies, especially in Europe, is the message that they may no longer be able to count so firmly on supplies from the United States in coming years. “What this really highlights for Europe is, you are running out of options,” said Henning Gloystein, a director for energy and climate change at Eurasia Group, a political risk firm.
While Russia does supply Europe with liquefied natural gas now, European leaders want to reduce those flows. The eastern Mediterranean looks doubtful as a major source in the future because of the conflict between Israel and Hamas. Aside from the United States, the other likely major producer of additional liquefied natural gas is Qatar, a tiny Middle Eastern emirate.
Gloystein said LNG from the United States was particularly attractive for European buyers because the shipping distances from North America are relatively short and the terms that US suppliers provide are much more flexible than those of most other sources. For instance, they usually allow a buyer to easily resell gas, whereas other gas powers like Qatar often impose restrictions. “The US is the one that matters,” he said.