LNG exports from US to Europe on track to exceed Biden’s promise and expectations. The United States is on track to exceed Biden’s March pledge of an additional 15 billion cubic meters of LNG for Europe this year, according to a Reuters analysis of export data compiled by Refinitiv, and to triple the pledge, Euractiv said.
When US President Joe Biden promised European leaders in March that he would help secure new supplies of liquefied natural gas to offset shortages caused by the Russian invasion of Ukraine, his promise was met with skepticism. .
After all, the US LNG industry was already reaching its export limits and the global market is dominated by long-term contracts that can dictate where exported gas goes for twenty years straight.
However, it turns out that Biden’s promise may have been too modest.
The No. 1 natural gas producer became the world’s top LNG exporter in the first half of 2022, the US Energy Information Administration (EIA) said on Monday (July 25).
The increase is welcome news for a Biden administration that has sought to strengthen energy ties with Europe as a way to combat Russian influence. But given the voracious global demand for natural gas, these European imports come at the expense of poorer nations like Pakistan and India, which could face energy deficits or be pushed into new deals with Russia.
Through June this year, the US exported around 57 bcm of gas as LNG with 39 bcm, or 68%, destined for Europe, Refinitiv data shows. That compares with 34 bcm, or 35%, of LNG exports shipped to Europe for the whole of 2021.
That means that the United States already shipped more gasoline to Europe during the first six months of 2022 than in the 12 months of 2021. If exports to Europe continue at the same rate during the second half of 2022, the total increase during 2021 would be around 45 bcm.
However, the pace of exports slowed in June after a fire shut down Freeport LNG, which provides about 20% of US LNG processing. Full operations are not expected until the end of the year.
Another challenge could be a well-above-average Atlantic hurricane season, analysts said.
Increased revenue in Europe
The unexpected change is happening because carriers are willing to pay contractual penalties for failing to deliver to countries like Pakistan and divert cargoes to Europe, where the high price covers tariff and profit, analysts said.
Analysts who previously argued Biden’s goal was unattainable now say the industry, dominated by companies like Cheniere Energy Inc and TotalEnergies, has proven far more flexible than they expected.
“It has become much more flexible than most thought it could be just three months ago. If you have to do things, things move,” said Henning Gloystein, director of energy and climate at Eurasia Group.
But that has meant a drop in US LNG imports in countries that pay less. Belgium, for example, saw its US imports of LNG increase by 650%, while Pakistan saw its US imports decrease by 72%, the data showed.
Benchmark gas prices in Europe have averaged $34.06 per million British thermal units (mmBtu) so far in 2022, compared to $29.99 in Asia and $6.12 in the United States.
That compares with 2021 average prices of $16.04 in Europe, $18.00 in Asia and $3.73 in the United States, the data showed.
“Shipments will go where the market demands,” said Ed Hirs, an energy economist at the University of Houston.
Scarcity in the foreseeable future
February’s invasion by Europe’s main gas supplier pushed already-high energy prices to record levels and prompted the EU to commit to cutting Russian gas use by two-thirds this year by increasing imports. from other countries and promoting renewable energies.
Despite the unexpected surge from the US, the EU is still in a precarious position heading into the high-use winter season, as Russia continues to threaten to withhold gas supplies.
The EU urged member states to cut gas use by 15% until March as an emergency measure.
Biden and European Commission President Ursula von der Leyen also announced a plan to form a task force to reduce Europe’s dependence on Russian fossil fuels, including gas.
The Commission is ready to ensure that the EU can receive around 50 bcm of LNG but, analysts say the shift of US cargoes will not last, as Asian and South American prices rise to attract more cargoes and clients seek court action to demand deliveries on contracts.
Editors: Marcin Bielecki, Marcin Bielecki