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Like Europe Craving for Natural Gas, US Signals, EU Support for Long-Term Deals


When Russia switched to cut off the supply of natural gas To parts of Europe, U.S. and European Union officials are indicating that they are more open to long-term arrangements to ship American fuel across the Atlantic.

EU and US committed to expanding exports of LNG, or liquefied natural gas to Europe by 2030. But the US has sent all it can to Europe, and industry officials say expanding the volume will require new export terminals, worth billions of dollars la, which traditionally requires long-term contracts from buyers to arrange financing.

European and US officials previously expressed opposition to such long-term contracts, which could lock up fossil fuel supplies for decades, contradicting another policy goal: reducing climate change-related greenhouse gas emissions. But in recent weeks, EU and White House officials have told industry executives that they favor long-term supply contracts, according to people briefed on the meetings, marking a departure. change.

Melanie Nakagawa, special assistant to the president and senior director for climate and energy at the National Security Council, publicly confirmed the long-term contracts on Tuesday.

“There is real potential here for Europe to signal demand for U.S. LNG and what U.S. LNG suppliers supply,” she said at an event hosted by the Center for Strategic and International Studies. that gas to them in the form of a long-term contract. Learn.

At a congressional hearing on Thursday, Energy Secretary Jennifer Granholm dismissed criticism that the Biden administration was not doing enough to support LNG exports.

“We have allowed almost three times more exports than we are currently exporting, and they haven’t started building yet,” she said. “This is not President Biden’s problem.”

A spokesman for the European Commission on Energy and Climate Affairs said: “There is political commitment to invest in this relationship.

Charif Souki, co-founder of fledgling LNG exporter

Tellurian Inc.,

Although there is no short-term gas supply for European energy, the focus should be on securing gas supplies for the latter part of the decade, said.

“The best time to start an LNG production facility was five years ago,” said Mr. Souki. “The next best time is today.”

Tellurian said it began construction of the $12 billion Driftwood LNG plant in Louisiana last month, although it has yet to finalize a funding plan for the project. Souki said the decision was partly driven by increased support from US officials, who he said expedited regulatory approvals and other processes.

Still, Mr. Souki said he expected US officials to clarify their longstanding stance on the role of natural gas in the energy mix, a position he called schizophrenic because of mixed messages. from the Biden administration.

Whatever happens, in the short term, LNG shipments are unlikely to completely replace Russia’s natural gas exports to Europe, which have accounted for about 40% of the continent’s supply in recent years. .

European Union Make a positive plan cut Russian gas imports after Invasion of Ukrainesaid the bloc would secure an additional 50 billion cubic meters of LNG per year between 2022 and 2030, higher than Europe’s roughly 108 billion cubic meters of imports last year.

To do that, Europe will need to make sure nearly all of the remaining new volumes coming online are not expected to go to China, around 17 bcm, and buy an additional 33 bcm from the lots. Customers are now going to other markets, according to Nikos Tsafos, President of Energy. and geopolitics at the Center for Strategic and International Studies. CSIS estimates that the earliest LNG plants currently under construction that could send new supplies to Europe are around 2026.

“There is no small chance that we will have a real physical shortfall,” Mr. Tsafos said. “The market cannot reallocate scarce supply.”

Energy Secretary Jennifer Granholm, who testified Thursday before Congress, responded to criticism that the administration was not doing enough to support LNG exports.


Photo:

Kevin Dietsch / Getty Images

Global LNG supply is expected to increase significantly over the next few years, spurred by construction projects already planned in the US, Qatar, Australia and other countries. However, global demand will grow rapidly with that, especially in China, which could consume about half of the additional forecast LNG, the analysts said.

Some LNG buyers and sellers in the West have delayed building more costly import and export infrastructure because of what they say are mixed signals from government officials in Europe and the US about the long-term advocates of policymakers towards natural gas.

Nation sought to cut emissions from fossil fuels to meet the goals of the international Paris agreement, to limit global warming to below 2°C and preferably 1.5°C, from pre-industrial levels. Some exporters have struggled to attract buyers to sign long-term LNG contracts, which typically last around 20 years.

The most pressing LNG problem facing Europe is the country’s lack of import infrastructure to take in more fuel. According to S&P Global Commodity Insights, import terminals in Northwestern Europe are operating at full capacity and as a result, LNG is being traded at a steep discount to European natural gas prices as buyers are no longer available. place to buy more LNG.

In Germany, which has no LNG import terminal, officials currently fast-tracking two facilities after the Russian invasion of Ukraine. From Germany

Uniper SE

A company spokesman has plans for a quick start to a regasification and storage unit at Wilhelmshaven that the company hopes to complete this coming winter.

A spokesman said the group behind a planned terminal in Brunsbüttel, Germany’s GmbH LNG Terminal GmbH, is moving forward “at full speed” with licensing and other preparatory steps. . The group said at the end of March that it had signed a non-binding agreement with the UK energy giant

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PLC to import LNG through terminal. A Shell spokesman said on Thursday the duration and terms of the deal were still being discussed.

The consequences of harsh economic sanctions against Russia have been felt globally. The WSJ’s Greg Ip joins other experts to explain the significance of what has happened so far and how conflict could transform the global economy. Photo illustrator: Alexander Hotz

In the US, the trade challenge for the construction of new export plants is that the EU aims to increase LNG imports only by 2030, which leaves too little time for any new export projects to take place. return the investment, Mr. Tsafos said.

On Tuesday, the first gas shipment to Poland from US exporter Venture Global LNG left the company’s Calcasieu Pass facility in Louisiana. The company produced its first LNG earlier this year and has another planned plant in Louisiana that it said will make a final investment decision soon.

Venture Global CEO Michael Sabel said that if the second plant were built, Poland would get about a third of its natural gas supply from the company. Mr. Sabel said a policy change was underway in Europe and the US on natural gas that he hoped would calm what he said was a 100-year storm in energy markets.

“You’re in a situation where it takes years to build that infrastructure and if you take the gas supply out of the equation you can’t run the grid, you can’t operate the utilities,” Sabel said. its industrial plant. “Providing mid- to long-term support will have a big impact.”

Write letter for Christopher M. Matthews at christopher.matthews@wsj.com and Jenny Strasburg at jenny.strasburg@wsj.com

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