U.S., EU Strike LNG Deal As Europe Seeks Gas Alternatives

The United States will work to supply 15 billion cubic meters (bcm) of liquefied natural gas (LNG) to the European Union this year to help it wean off Russian energy supplies, according to the transatlantic partners.

Concerns over security of supply were reinforced this week after Russia ordered the switch of gas contract payments to rubles, raising the risk of a supply squeeze and even higher prices.

Europe faces a major task in substituting supplies of Russian gas, with Moscow supplying around 40 percent of its gas need.

U.S. gas supplies to the EU accounted for 6.3 percent in the first half of 2021, the bloc’s statistics agency says.

Analysts at ING Bank said even if the U.S. promised delivery of 15 bcm is achievable, “it still falls well short of replacing Russian gas imports, which amounted to around 155 bcm in 2021.

U.S. LNG plants are producing at full capacity and analysts say most of any additional U.S. gas sent to Europe would have to come from exports that would have gone elsewhere.

LNG under contract cannot be easily redirected. Already high European gas prices would have to rise further to attract those cargoes to the 27-nation bloc, analysts said.

Moreover, Europe’s LNG terminals have limited available capacity to absorb extra supply from the United States or other major producers in the event gas from Russia is disrupted, Refinitiv data showed.

LNG needs to be regasified by transforming it from its frozen state back to gas and then transporting it through pipes – either directly for burning or to generation plants to make electricity.