Europe and the US make ambitious plans to reduce reliance on Russian gas
By Clifford Krauss
The United States announced a deal with European leaders late last week to increase shipments of natural gas to help wean Europe off Russian energy. And Germany set an ambitious goal of halving its imports of Russian oil and coal this year and freeing itself from its dependence on Russian natural gas by the middle of 2024.
Germany’s timelines, outlined by its vice chancellor, are a remarkable turnabout by Europe’s largest economy, which has long relied extensively on Russia for energy. Just a few months ago, Germany was still aiming to buy even more natural gas from Moscow through a new pipeline called Nord Stream 2.
But President Vladimir Putin’s invasion of Ukraine has forced leaders in Germany and other European countries to rip up the energy playbook they had used for years, decades even, in just a month. The German vice chancellor, Robert Habeck, said at a briefing in Berlin that his country was shifting away from Russian energy at an “insane pace.”
President Joe Biden is seeking to encourage similar moves by other European countries, in part by offering up the U.S. as an energy supplier.
The deal he announced, in Brussels earlier Friday, lacked many details but contained some big goals: The U.S. would send an additional 15 billion cubic meters of liquefied natural gas to Europe this year — roughly 10% to 12% of current annual U.S. exports to all countries. By 2030, the president said, the U.S. will aim to increase supplies by as much as 50 billion cubic meters a year.
The moves caught many in the U.S. energy industry by surprise. Oil and gas executives who have become accustomed to being pilloried for their contributions to climate change were suddenly being called up to help liberate European allies from Russian energy. While the industry was not certain how Europe would make such a giant pivot, executives clearly relished their new casting as saviors rather than villains.
“I have no idea how they are going to do this, but I don’t want to criticize them, because for the first time they are trying to do the right thing,” said Charif Souki, the executive chair of Tellurian, a U.S. gas producer that is planning to build an export terminal in Louisiana.
Biden and the president of the European Commission, Ursula von der Leyen, said many of the specifics would be worked out by a task force dedicated to reducing Europe’s dependency on Russian oil and gas in ways that would not undermine the climate policies of the two partners.
Among the things they did not address was the shortage of port capacity to ship and receive more gas on both sides of the Atlantic. The effort could also struggle because the Biden administration can’t simply order U.S. exporters to sell gas to European buyers or to set prices acceptable to those buyers.
“We’re going to have to make sure that families in Europe can get through this winter and the next while we’re building an infrastructure for a diversified, resilient and clean energy future,” Biden said.
The European Union is heavily reliant on energy imports from Russia, a big producer of oil, diesel, coal and, perhaps most importantly, natural gas. That dependence has become a growing problem as the EU seeks to punish Putin. Russia provides about 40% of Europe’s natural gas, and a sizable chunk of it is shipped by pipeline through Ukraine.
Germany has long been one of Russia’s biggest customers. Having decided to shut down its nuclear plants, Germany has increasingly relied on natural gas. Because it got relatively affordable gas by pipeline from Russia — and some from the Netherlands, Norway and other suppliers — it declined to build any terminals where liquefied natural gas could be imported.
Germany also imports nearly one-third of its crude oil from Russia. It has been trying to slash its consumption with generous subsidies for electric cars and greater investment in public transportation.
The Ukraine war has accelerated such German efforts under Chancellor Olaf Scholz, who leads a coalition government made up of conservatives, liberals and environmentalists. Germany this year has revived plans to build gas importing terminals and has suspended final approvals of Nord Stream 2, an almost-complete pipeline that would have fed it a steady supply of Russian gas.
“Every supply contract that is terminated hurts Putin,” Habeck said Friday.
Later in the day, EU countries agreed to jointly purchase and store natural gas. They set a target of filling 80% of their underground gas storage facilities by November as a buffer against supply disruptions during winter, when gas use increases for heating.
In the U.S., gas exporters were already shifting sales to Europe from Asia in recent months, largely because prices in Europe have been higher than almost anywhere else in the world because of rising tensions with Russia and, more recently, the war in Ukraine. Nearly 75% of U.S. LNG exports have gone to Europe so far this year, up from 34% in 2021. The Biden administration has encouraged that shift by relaxing export restrictions to certain European countries.
Energy executives say the Biden administration could help increase the flow of gas by streamlining permitting for new U.S. export terminals, where natural gas is chilled into a liquid and pumped into oceangoing tankers. Washington and the EU could also provide loan guarantees for U.S. export terminals and European import terminals. There are roughly a dozen U.S. export terminals that have won regulatory approval but need financing to be built. About 10 European import terminals are being built.
Environmentalists criticized Biden’s announcement because they fear it will commit the U.S. and Europe to using fossil fuels for decades longer than they argue is sustainable given the growing toll of climate change.
“There is no way to ramp up U.S. LNG exports and deliver on the imperative climate commitments that the U.S. and EU have pledged,” said Abigail Dillen, the president of Earthjustice, an environmental law organization. She warned that the buildup of LNG infrastructure would “lock in expensive fossil dependence and dangerous pollution for decades to come.”
U.S. and European officials also agreed to seek ways to decrease greenhouse gas emissions from LNG infrastructure and pipelines and to reduce the release of methane from gas operations. They said they would ramp up energy efficiency initiatives, such as the deployment of heat pumps and the use of clean hydrogen technologies to displace fossil fuels, as well as expedite planning and approval of renewable energy projects such as offshore wind and solar power.
The Biden administration has banned Russian energy imports as part of a set of sanctions against Putin, a relatively easy step for the U.S. because it is a net exporter of energy. Some U.S. lawmakers would like the EU to stop buying oil and gas from Russia altogether, but the prospect for that has been dismissed by several EU leaders, who see it as a financially disastrous step that would hurt Europe more than Russia.