When the White House invoked its “pause” in permitting of proposed new infrastructure for exporting liquefied natural gas (LNG) in January, many expressed concerns the move would reduce global confidence in the US industry as a reliable provider. Another concern expressed at the time and since was that Vladimir Putin and Russia would be a major beneficiary, along with other gas-exporting, non-allied nations like Qatar and Algeria.
Qatar responded within a month, announcing a massive expansion as part of a plan to gain control of as much as 25 percent of the global market by 2030 in late February. Likewise, Algeria has announced a series of expansions and takeaway contracts in its own LNG business since January.
Now comes news that, for the first time since mid-2022, Russian exports of natural gas into Europe exceeded those from the US. The Financial Times reports that Russian gas, imported into Europe mainly via pipeline, supplied 15 percent of the EU market during May, compared to 14 percent coming into the continent from the US on LNG tankers.
FT attributes the May numbers to one-off factors like the temporary shutting-in of one large US export facility, which no doubt had some impact. But American LNG supplied 21 percent of the European market for natural gas in January and has dropped steadily every month since the Biden pause was invoked. It is clear U.S. policy is impacting Europe’s energy supply, security, and investment decisions.
“It’s striking to see the market share of Russian gas and [liquefied natural gas] inch higher in Europe after all we have been through, and all the efforts made to decouple and de-risk energy supply,” said Tom Marzec-Manser, head of gas analytics at consultancy ICIS.
But Russia’s benefits from the LNG pause could become temporary, as Ukraine has said it will not renew its supply agreement with Gazprom to take gas from a Russian pipeline that carries gas through Ukraine into central Europe. To that end, Ukraine gas supplier DTEK announced a 20-year supply agreement with US LNG exporter Venture Global earlier in June for up to 2 million tonnes per year from Venture Global’s CP2 export hub. The agreement will also supply LNG from Venture Global’s Plaquemines facility in the short-term to Ukraine and Eastern Europe ahead of this upcoming winter.
The LNG supply will be transported through the Vertical Corridor gas transmission system from Greece.
What’s notable is FERC just announced it will decide whether to green-light Venture Global’s CP2 project next week. The LNG facility, CP2, is integral to the deal with Ukraine’s DTEK.
According to data provided by financial firm LSEG, US LNG exports to Europe have dropped every month through May during 2024. Overall US exports fell every month through April, but recovered slightly in May thanks to increased shipments to Asian markets. Europe remained the biggest market for US LNG in May, but the percentage dropped from 57 percent during March to 42 percent in May.
New sanctions on Russian gas invoked this week by the European Union focus on Russia’s LNG sector and will not impact Putin’s ability to send gas into Europe via pipeline. The new sanctions – the first from the EU to target Russian gas – deny EU ports the right to resell Russian LNG cargoes when they arrive. Another sanction prohibits EU companies from helping to finance Russian plans to develop Baltic and Arctic LNG export terminals.
The Bottom Line
The aggressive moves by Qatar, Algeria and Russia to expand capacity while the Biden White House keeps its pause in place signals those countries fully intend to play for the long-term. Those countries would love nothing more than for U.S. LNG to be squeezed out of the market to give them full control of the commodity’s price.
The Biden White House owes US trading partners clarity on federal policy. Every month this pause remains in effect with no certain end gives these competing nations an increased advantage to seize bigger shares of the global market. Regardless of these and other potential impacts, it should not be the US government’s role to artificially impede the ability of American business to compete in markets around the world. This pause was ill-considered and poorly justified from the start and should be rescinded.