European leaders have grown quite fond of bandying about the notion of liberating their economies from their dependence on Russian oil and gas. Unfortunately, the numbers just don’t make sense.
On Tuesday, the FT highlighted how Washington’s pledge to wean Europe off of Russian gas by boosting LNG exports simply doesn’t add up.
As a reminder, the US plan is supposed to work in three steps: first, it will help the EU secure short-term liquefied natural gas supplies to begin displacing Russian gas. Second, Europe will work “toward the goal of ensuring” a bigger market for US gas by 2030. Third, the US would help Europe accelerate its transition to clean energy.
But how much more gas can the US even export? Limits on both exporters’ capacity and Europe’s infrastructure and ability to absorb gas imports by boat suggest that, for the foreseeable future, the notion of offsetting Russian energy exports is pretty much a pipe dream.
The US says it aims to add 15 billion cubic meters of LNG to the EU this year, with more in the years to come. It didn’t specify the origins of the gas, noting it would “work with international partners”. By comparison, Russia currently exports 155 billion cubic meters a year of gas to the EU.
However, the baseline for this 15 billion pledge isn’t clear. While the US shipped about 22 billion cubic meters of gas to Europe in 2021, it has already sent about 10 billion in the first quarter of this year. All of it is in the form of LNG, which is much more expensive to ship than gas that flows through a pipeline (as most of the Russian gas arriving in the bloc does).
Since October, America’s LNG exports to Europe have already more than doubled.
Looking ahead, a team of analysts at Goldman Sachs warned clients in a recent research note that there’s little scope for the US to boost LNG exports between now and 2025.
Another major obstacle to replacing Russian gas with American (or Qatari, or Saudi or Australian) LNG is the lack of necessary infrastructure available in Europe. LNG must be carefully offloaded and “regasified” from its liquid state after arriving at its destination. And most European countries simply don’t have the necessary infrastructure to accomplish this. Perhaps this is why European Commission President Ursula von der Leyen has called on the EU to “pool its resources”, while Germany has suggested renting floating “regasification” vessels.
And even though the bloc’s energy situation is more precarious than it has been in years, the clean-energy partisans are have vehemently opposed the construction of more of this LNG infrastructure for fear that it could undermine their agenda of renewables-first.
This is a U-turn from previous EU purchasing decisions as many buyers had stopped negotiating with US developers for LNG due to ESG [environmental, social and governance] concerns,” said Sindre Knutsson at Rystad Energy, a consultancy.
Environmentalists were scathing. “Allowing for the expansion of new and expanded gas export facilities would lock in decades of reliance on risky, volatile fossil fuels and spell disaster for our climate,” said Kelly Sheehan at the Sierra Club.
Even if Europe did manage to rapidly build out the infrastructure (which is unlikely, given the opposition from the ESG fanatics), they would likely have trouble convincing exporters to cut them in. After all, why would the Saudis (who have so far steadfastly refused to boost production in the face of the Ukraine conflict), or the UAE reroute their oil and gas from rapidly growing Asian markets (where demand is expected to remain robust for years to come) to Europe (where any short-term increase in demand is expected to be quickly offset by the bloc’s pivot to renewables?).
That’s a question President Biden and his European compatriots have been struggling to answer.