Raising the ambition level for EU LNG imports
As the EU comes to terms with a new energy reality, east coast US LNG offers clean, flexible and reliable solutions at a pivotal moment.
While supply concerns this winter are less pronounced than last year due to factors such as increased LNG and pipeline supplies, effective storage filling, demand reduction, and a strong conclusion to winter 2022/2023; new concerns accompanying the changing supply landscape present an opportunity for the EU to confront security and affordability issues head-on.
US LNG has played a pivotal role thus far in aiding the continent’s adjustment to a new energy reality, and with action from policymakers on both sides of the Atlantic, more can be done to ensure Europe receives a secure and affordable supply of the cleanest possible LNG, all while remaining consistent with long-term climate ambitions.
State of Play in EU
Today, LNG accounts for around 40% of total gas imports to the EU. This is double what LNG accounted for just 5 years ago. As we are now beginning to realise, however, the growing importance of LNG in the EU energy mix is accompanied by its own suite of risks. This rings especially true when the lion’s share of extra LNG imports comes from spot market purchases and destination-flexible volumes diverted from other countries and markets. Such a dynamic has dramatically increased the exposure of European gas prices to global LNG market volatility – on a scale which it has not experienced since Russian pipeline supplies dominated the European market. Just this past August, European benchmark prices rose markedly as the market responded to supply outages, potential strikes at several large LNG facilities in Australia, and dwindling gas storage levels in Japan.
But Europe is rightly focused on the methane issue. Methane emissions are 80 times more potent than CO2 in terms of their global warming potential, and the energy sector arguably has the largest potential for rapid reductions by detecting and repairing leaks in infrastructure such as pipelines. At this juncture, Europe must decide if it wants to import LNG from countries with high methane emission intensities or promote imports from stable, best-in-class countries like the US and Norway.
What this tells us is that Europe needs a tailored solution to its LNG demand requirements. Specifically, Europe needs long-term contracts with reliable suppliers to dilute its sensitivity to volatile spot markets and global supply shifts. However, such contracts must be flexible to enable Europe to either re-direct shipments as soon as LNG can be phased out, or store volumes for supply security and flexible capacity reasons. Such a solution guarantees its supply without contradicting climate goals. It is also imperative that Europe demonstrate its support for pioneering suppliers advancing efforts on methane emissions abatement. As long as LNG has a role in the EU’s energy mix, only the cleanest supplies should make their way into the EU.
US LNG as a viable solution
The Partnership to Address Global Emissions (PAGE) is a coalition of responsible East coast US LNG producers and infrastructure owners. East coast US LNG has the capacity to meet the EU’s needs, while maintaining the highest standards on methane emissions abatement. Produced in the Appalachian Basin, PAGE member companies are offering some of the cleanest LNG in the world. To put this into perspective, PAGE member company EQT – a company intensely focused on methane emission abatement and bolstering the EU-US energy partnership – reduced 70% of its methane emissions over the past 18 months by replacing all natural gas-driven pneumatic devices across their asset base. As a result of this vigorous strategy to reduce methane emissions, the Oil & Gas Methane Partnership 2.0 (OGMP 2.0) awarded EQT a “Gold Standard” rating, the highest reporting level under the initiative. EQT is just one example of what PAGE members are doing to reduce global emissions and ensure that Europe can be supplied with the cleanest LNG.
In addition, LNG purchase agreements offered by US partners are structured in a way whereby, as the EU closes in on targeted fossil fuel phaseout dates, contracted volumes can either be stored for added flexibility or turned away and redirected to other buyers on the spot market. This ensures that efforts to secure European gas supplies also compliment the EU’s climate goals.
East coast US LNG can satisfy Europe’s nuanced LNG demand requirements. But permitting hurdles in the US threaten the ability of companies to provide the necessary pipeline infrastructure to transport these gas supplies to LNG terminals for export to Europe and beyond. Clear political signals from EU officials regarding demand requirements and action by US Congress to alleviate permitting delays are therefore needed. Without such action, the required infrastructure investments cannot be made in time. EU-US cooperation on energy security is stronger than ever. But to reach new heights, this partnership must be more ambitious than ever.
Europe is at yet another critical juncture in its persisting energy security conundrum. Now is the time for action to avoid years of scrambling together LNG shipments and incremental pipeline supplies, while remaining a passenger to further cut-offs of Russian gas and global supply shifts.
Action today places Europe in the driving seat, deciding where it wants its LNG from, how clean it is and under what conditions into the future it wants to purchase it. PAGE is committed to supporting these goals by supplying abundant volumes of clean, flexible, and affordable LNG from the East Coast of the US.