Why Biden can't help Europe rid itself of Russian gas



“Governments don’t make deals” when it comes to directing U.S. oil and gas resources to specific nations, said Amy Myers Jaffe, managing director of the Climate Policy Lab at Tufts University’s Fletcher School. “You don’t have government-to-government oil companies.”

That means the United States may not be able to do much to immediately ease the energy crunch for European states that are seeking to cut their imports of natural gas from Russia by two-thirds this year in response to Vladimir Putin’s invasion of Ukraine. Russian gas shipments to Europe reached 5.5 trillion cubic feet of gas in 2020, up more than 25 percent from a decade ago.

The energy crisis for America’s cross-Atlantic allies is still forcing a shift in policies for the Biden administration, which had come into office pledging to drive a transition away from fossil fuels and toward clean energy. Republicans and European leaders alike are pushing the White House to use U.S. energy production as a way to help Germany and other countries reduce their dependency on Moscow.

“Hopefully, we are beyond [European dependence on Russia] and producing more energy to provide them by next winter,” Republican Alaska Sen. Dan Sullivan said in an interview.

The issue is expected to be a central topic when Biden visits Europe to attend a NATO summit and a European Council meeting scheduled for Thursday. The White House’s senior adviser for energy security, Amos Hochstein, and members of the State Department’s Bureau of Energy Resources are expected to accompany him, a person familiar with the plans said.

The White House did not reply to questions. The State Department declined to comment on who would be accompanying Biden.

The visit comes after European Commission Vice President Maroš Šefčovič met with national security and energy officials in Washington this week, said an EU energy official who requested anonymity to discuss details. They included Deputy Energy Secretary David Turk, who has coordinated much of the Biden administration’s response to energy supply challenges.

EU leaders are also making their requests public.

France’s minister for the ecological transition, Barbara Pompili, said during a March 10 event that she had told U.S. Energy Secretary Jennifer Granholm that week, “You have to increase your production if you’re going to help us.”

“She told me she will try to do that,” Pompili added.

But Biden will have to be wary of making promises his administration can’t keep. The sheer scale of Europe’s gas needs in a market that is already running tight on supply will create a huge hurdle, as will the U.S. government’s relatively small influence on short-term issues in the energy markets.

Energy analysts say the EU plan to cut Russian imports by 102 billion cubic meters (3.6 trillion cubic feet), or two-thirds of its Russian purchases, isn’t realistic, but that a wartime effort might see the bloc find new sources for 50 to 60 percent of that target. Still, such a shift would strain the global LNG market.

The U.S. is on course to become the leading LNG supplier in the world this year. But its LNG export companies are running near full capacity, with 80 percent of their cargoes going to Europe, said Ross Wyeno, the lead Americas LNG analyst at S&P Global. Venture Global LNG started initial shipments from its Calcasieu Pass plant in Louisiana this month and will fully ramp up by the beginning of 2023, but otherwise no new capacity is expected to come online until 2024.

“I don’t think the answer is the U.S. is going to offset the entirety of Russian gas with LNG exports,” said Charlie Riedl, head of the trade association Center for Liquefied Natural Gas, in an interview. “That’s something I’d be happy to be wrong on, but I don’t think it’s going to offset the entirety of Russian gas.”

The sudden European demand for more gas could help finance the building of new LNG facilities, but it would take at least one to two years to build them after executives give the green light to start construction, Riedl said. European companies, which to date have not been big investors in U.S. LNG plants, could decide to sign relatively short-term supply contracts lasting 10 years or so, he added.

“I do think Europe is emerging as a major market, not just for U.S. LNG, but other suppliers,” Riedl said.

Complicating Europe’s plans will be the weather, which is the main driver of gas demand as people turn their thermostats up or down. Even before Russian tanks crossed into Ukraine, European gas inventories were dwindling because of cold temperatures in 2021. That was offset, however, by milder temperatures in Asia, which allowed Europe to receive LNG cargoes that would normally have headed to South Korea, China or Japan.

“Europe got bailed out by a warm winter in Asia,” Freeport LNG Chief Executive Michael Smith said at an energy conference in Houston last week.

The EU energy official who spoke to POLITICO on condition of anonymity to discuss conversations with the Biden administration admitted that the bloc’s requests are tough to meet. A major concern is bringing in enough natural gas to rebuild storage levels ahead of next winter’s heating season — auguring painful price spikes and potential shortages if the EU fulfills its plan to ditch most Russian energy.

Another person familiar with the conversations between the EU and the Biden administration agreed that Europe’s requests are vague. EU officials have pressed the Biden administration to ramp up U.S. production and exports, but the Biden administration contends there’s little it can do immediately since the government does not run the oil and gas sector.

“Europe’s big problem is the inability to articulate a realistic short-term energy security strategy within the boundaries of its decarbonization agenda,” said Nikos Tsafos, energy and geopolitics chair at the Center for Strategic and International Studies, in an email. “The end result is that despite the enormous political will for change, there is no real roadmap to realize this change yet.”

The Biden administration did give Europe and the oil and gas industry a potential boost Wednesday by allowing two existing Cheniere LNG export terminals to expand the number of countries that it can sell its gas to, fulfilling long-standing industry requests.

Europe’s turn away from Russia comes at a time when its natural gas inventories are already extremely low, giving it less cushion if demand spikes. European storage tanks are expected to hold about 1 trillion cubic feet of gas by the middle of this year, a steep drop from 3 trillion cubic feet at the same point in 2020, according to data from RBN Energy.

The EU has been in close contact with major U.S. natural gas producers and exporters, such as Cheniere, Tellurian and Sempra, along with industry groups LNG Allies and the American Petroleum Institute, the EU energy official said.

But the person added the EU is wary of supporting fossil fuel industry messaging that’s been pressuring the Biden administration to expand natural gas production.

That’s because natural gas is unpopular in the EU given widespread opposition to fracking and pollution from methane, a potent greenhouse gas that is the target of a global climate change campaign. The official noted the EU is walking a fine line in lobbying for more U.S. natural gas while trying to keep its aggressive, near-term climate targets in check. The EU has pledged to cut emissions of methane, the main component of natural gas, by 70 percent of 2020 levels by 2030, and wants to slash emission of carbon, which is released when gas is burned, by 55 percent below 1990 levels this decade.

“You have to be very careful about what you hear, what you get — the promises — and distinguish between what the industry would ask for anyway and what they’re asking for in the context of the current situation,” the EU official said. “I am very cognizant of that division.”

Leslie Palti-Guzman, head of the LNG analysis firm Gas Vista, noted the discrepancy. The French government in 2020 stepped in to quash a potential LNG deal between its partially state-owned company Engie and the American LNG company NextDecade over fears that U.S.-produced gas was too dirty. Engie eventually concluded the deal after side-stepping the government.

But now Europe is expected to triple its imports of LNG from the United States, according to Gas Vista forecasts.

“Europe finally sees salvation in U.S. LNG, and nobody talks about ‘dirty-fracking’ any longer,” Palit-Guzman said.

Josh Siegel contributed to this report.



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