EU clinches US LNG deal in bid to curb reliance on Russian gas - Financespiders

EU clinches US LNG deal in bid to curb reliance on Russian gas - Financespiders

The European Union and the United States are set to unveil a deal on Friday to supply Europe with more US liquefied natural gas (LNG), sources told the Reuters news agency, as the European bloc seeks to quickly curb its reliance on Russian fossil fuels.

The invasion of Ukraine by Russia, Europe’s top gas supplier, pushed already-high energy prices to record and has prompted the EU to pledge to cut Russian gas use by two-thirds this year by hiking imports from other countries and quickly expanding renewable energy.

President Joe Biden, who attended the EU leaders summit in Brussels on Thursday, promised the US would deliver at least 15 billion cubic meters (bcm) more LNG to Europe this year than planned before, sources familiar with the matter said.

One of the sources added the deal would also include higher US LNG exports to the EU in 2023.

But since US LNG plants are already producing at full capacity, analysts said most of the additional gas going to Europe would have to come from exports that would have gone to other parts of the world.

“We expect near-term measures to support European LNG imports to rely on the reallocation of existing supply,” analysts at Goldman Sachs said in a report, noting “such a relocation to Europe is already happening” because European gas prices have in recent months mostly been the highest in the world.

Jason Feer, global head of business intelligence at Poten & Partners, an energy and shipping consultancy, said there is little new LNG export capacity expected to enter service in the US this year.

“But almost all of it in the US already belongs to somebody. It is under contract,” Feer said, noting “If Europe wants more LNG, they are going to have to pay for it.”

Russia is the EU’s top gas supplier, sending a total of 155 cm of gas to the EU in 2021. Most of that came through pipelines, and 15 bcm was LNG.

US LNG exports to the EU topped 22 bcm last year. US exporters have shipped record volumes of LNG to Europe for three consecutive months, as prices there have jumped to more than 10 times higher than a year ago, with buyers in Europe and Asia competing for tight supply.

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Moscow on Wednesday said “unfriendly” countries, including EU member states, must start paying in roubles for Russian oil and gas. This heightened concerns of potential disruptions to Europe’s gas supply. On Thursday, some EU leaders said the demand was at odds with supply contracts.

“There are fixed contracts everywhere, with the currency in which the deliveries are to be paid to be part of these contracts,” German Chancellor Olaf Scholz said. “In most cases, it says euros or dollars, this is the basis we are working on.” “Nobody will pay in roubles,” Slovenian Prime Minister Janez Jansa said.

EU leaders are due to agree on Friday, the second day of their summit, to “work together on the joint purchase of gas, LNG, and hydrogen” ahead of next winter, and coordinate filling gas storage, according to their draft decision seen by Reuters.

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Those moves are aimed at building up a supply buffer of non-Russian gas. The EU’s executive European Commission would lead negotiations pooling demand and seeking gas, following a model the bloc used to buy COVID-19 vaccines. Source: MSN

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