Why Can’t the US Quickly Separate Europe From Russian Gas?

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HOUSTON – Biden administration wants to send more natural gas to help break Europe Dependence on Russian energy. But this grand ambition will be largely symbolic, at least in the short term, as the United States does not have enough capacity to export more gas and Europe does not have significantly more import capacity.

In recent months, with the encouragement of President Biden, American exporters have already maximized output of terminals converting natural gas to liquid It is easily shipped by large tankers. And they routed shipments originally going to Asia to Europe.

But energy experts say it’s hard to build enough terminals to expand significantly on both sides of the Atlantic. US liquefied natural gas exportsor it may take two to five years for LNG to reach Europe. This fact will likely limit the scope of the gas supply announcement Mr. Biden and European leaders are expected to make on Friday.

“In the near term, there is no better option than to beg one or two Asian buyers to drop the LNG tanker for Europe,” said Robert McNally, energy adviser to former President George W. Bush. But he added that once enough gas terminals are built, the United States can become an “energy arsenal” that helps Europe break its dependence on Russia.

Any effort to increase natural gas exports Mr Biden and European authorities’ efforts to combat climate change. Once new export and import terminals are built, they will likely continue to operate for several more decades, far longer than many environmentalists consider sustainable for the welfare of the planet.

For now, however, climate concerns seem to linger in the background as the US and European leaders try to punish Russian President Vladimir V. Putin for invading Ukraine. depriving it of billions of dollars in energy sales.

The US has already significantly increased its energy exports to Europe. So far this year, almost three-quarters of USLNG has gone to Europe, up from 34 percent for all of 2021. As natural gas prices rose in Europe, American companies did everything they could to send more gas there. The Biden administration has helped by getting buyers in Asian countries like Japan and South Korea to forego LNG shipments so they can be sent to Europe.

The United States has abundant natural gas, most of it in shale fields from Pennsylvania to the Southwest. Oil bubbles up from the ground with oil from the Permian Basin, which connects Texas and New Mexico, and producers there are gradually ramping up both oil and gas production after drastically reducing production in the first year of the pandemic when energy prices fell.

But the biggest problem with sending more energy to Europe is that natural gas, unlike crude oil, cannot be easily shipped to transoceanic ships. The gas must first be cooled in an expensive process, mostly at export terminals on the Gulf Coast. The liquid gas is then poured into special tankers. When ships arrive at their destination, the process is reversed to convert LNG back to gas.

A major export or import terminal can cost more than $1 billion and can take years to plan, get permits, and complete construction. There are seven export terminals in the United States and 28 large-scale import terminals in Europe that receive LNG from suppliers such as Qatar and Egypt.

Some European countries, including Germany, have not been interested in building LNG terminals until recently, as it is much cheaper to import gas from Russia via pipeline. Germany now reviving plans to build the first LNG import terminal on the north coast.

“Europe’s gas needs are much greater than the system can supply,” said Nikos Tsafos, an energy analyst at the Center for Strategic and International Studies in Washington. “Diplomacy can only do so much.”

But in the long run, energy experts say the US can do a lot to help Europe. Together with the European Union, Washington can provide loan guarantees to US export and European import terminals to reduce costs and speed up construction. Governments may require international lenders such as the World Bank and the European Investment Bank to prioritize natural gas terminals, pipelines and processing plants. And they can ease regulations that gas producers, pipeline builders and terminal developers claim make gas infrastructure construction more difficult or expensive.

Charif Souki, chairman of Tellurian, a US gas producer that plans to build an export terminal in Louisiana, said he hopes the Biden administration will streamline permits and environmental reviews “to ensure things happen quickly without micromanaging everything.” He added that the government may encourage banks and investors, some of whom have recently shunned oil and gas projects to polish their climate references, to lend to projects like his.

“We will develop the $100 billion infrastructure we need if all the major banks in the US and big institutions like BlackRock and Blackstone feel comfortable investing in hydrocarbons and will not be criticized,” said Mr. Souki.

A handful of export terminals are under construction in the United States and could increase exports by roughly a third by 2026. Roughly a dozen US export terminal projects have been approved by the Federal Energy Regulatory Commission, but they cannot proceed until funding is received from them. investors and lenders.

“This is the bottleneck,” said Mr Tsafos.

Roughly 10 European import terminals are under construction or in the planning stages in Italy, Belgium, Poland, Germany, Cyprus and Greece, but most have still not arranged their financing.

Russia supplies about 40 percent of Europe’s gas, and its biggest customers tend to be in Eastern and Central Europe. Some countries have developed LNG import capacity, but most of this is in Southern Europe, which is not well connected by pipeline to countries to the north and east.

A month after the war in Ukraine, Russia’s gas shipments to Europe remained relatively stable, but that could change. Mr Putin said on Wednesday that countries hostile to Russia pay your energy in rubles instead of euros or dollars. This will force European companies to settle with Russian banks sanctioned by Western governments.

There are some signs that European businesses and individuals may be reducing their use as natural gas becomes too expensive. For example, Yara International, one of the leading fertilizer manufacturers in Italy and France, said it will reduce production. high raw material costs such as natural gas.

While reducing demand has helped, some climate scientists and activists worry that the Biden administration and the European Union’s focus on building LNG terminals could deal a heavy blow to efforts to address global warming by promoting the use of fossil fuels.

“At a time when you really need to reduce your overall emissions, there is a risk of locking in 20 or even 30 years of emissions from export infrastructure,” said Clark Williams-Derry, senior researcher at the Institute of Energy Economics and Finance. Analysis, a research organization.

Jason E. Bordoff, founding dean of Columbia University’s School of Climate and former energy adviser to President Barack Obama, said the Biden administration could encourage more gas shipments to Europe while simultaneously promoting it. cleaner alternatives such as wind and solar power.

“In the long run, US government funding tools and diplomacy can help accelerate Europe’s clean energy transition to reduce the inevitable dependence on volatile hydrocarbons,” he said.

Some supporters of natural gas exports say the fuel could help Europe meet climate goals by replacing coal use in power plants. Burning coal releases more greenhouse gases than burning gas.

Mr. Biden’s senior climate change adviser, Gina McCarthy, said on Thursday that the administration intends to “balance” what it calls a “short-term emergency fix” to help Europe tackle climate change.

“We cannot increase our reliance on fossil fuels,” McCarthy told a group of renewable energy executives. Even in our talks with the European Union, we make clear distinctions.”

Lisa Friedman Contributed to reports from Washington.

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