US, EU strike LNG deal as Europe seeks to cut back on Russian gas

US President Biden meets EU Commission President von der Leyen in Brussels
US President Joe Biden delivers a joint press statement with European Commission President Ursula von der Leyen at the US Mission in Brussels, Belgium, March 25, 2022. REUTERS/Evelyn Hockstein

March 25, 2022

By Jarrett Renshaw, Vera Eckert and Joseph Nasr

BRUSSELS/BERLIN (Reuters) – The United States will work to ship 15 billion cubic meters (bcm) of liquefied natural gas (LNG) to the European Union this year in a bid to wean it off Russian gas supplies, transatlantic partners said on Friday.

The EU aims to reduce its dependence on Russian gas by two-thirds this year and end all Russian fossil fuel imports by 2027 due to Russia’s invasion of Ukraine. Russia supplies around 40% of Europe’s gas needs.

Concerns about security of supply intensified this week after Russia ordered gas contract payments to be switched to rubles, raising the risk of supply shortages and even higher prices.

US LNG plants are producing at full capacity, and analysts say most of the additional US gas sent to Europe would have to come from exports that would have gone elsewhere, and already high European gas prices should continue to rise. around these charges in the 27th nation bloc.

Contracted LNG cannot simply be diverted.

“It typically takes two to three years to build a new production facility, so this deal may be more about diversion of existing supplies than new capacity,” said Alex Froley, gas and LNG analyst at ICIS.

Senior US government officials have not specified how much or what percentage of the additional LNG supply would come from the United States.

Even if the 15 bcm is achievable, “it is still far from replacing Russian gas imports, which amounted to around 155 bcm in 2021,” analysts at ING Bank said.


US President Joe 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.

The commission will also work with EU countries to ensure they can receive about 50 billion cubic meters of additional LNG by at least 2030, according to the factsheet provided by the White House.

It was unclear if the amounts were additional to last year’s 22 billion cubic meters of US exports to the EU.

The EU has already ramped up efforts to secure more LNG after talks with supplier countries, leading to record shipments of 10 bcm of LNG in more than 120 vessels in January.

Meanwhile, Germany, the EU’s largest importer of Russian gas, said it had made “significant progress” in reducing its dependence on Russian gas, oil and coal imports.

Economics Minister Robert Habeck also said that it could take until the summer of 2024 for Europe’s largest economy to wean itself off of Russian gas.

German utilities on Thursday said their country needed an early warning system to address gas shortages, as Putin’s call for gas payments in rubles prompted companies and EU states to scramble to understand the implications.

Some countries, like Italy, said they would continue to pay in euros. The CEO of Poland’s PGNiG said the company, which has a contract with Gazprom until the end of this year, cannot simply switch to rubles.

Russia’s demand for payment in rubles for gas has yet to be backed up by a concrete mechanism.

A spokesman for Germany’s Uniper said on Friday: “We have not received any official notification or request to process the settlement in rubles.”

Germany’s economy minister said the government will consult with its partners on Putin’s demand for payment in rubles.

(Reporting by Jarrett Renshaw in Brussels, Joseph Nasr in Berlin, Vera Eckert in Frankfurt, Nina Chestney and Marwa Rashad in London; writing by Philip Blenkinsop and Nina Chestney; editing by Barbara Lewis and Jason Neely) US, EU strike LNG deal as Europe seeks to cut back on Russian gas

Bobby Allyn

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