Crunched for fuel: Why US gas can’t solve Europe’s energy crisis

By TEDDY OSTROW

WASHINGTON: As Europe weans itself off Russian energy as punishment for Moscow’s invasion of Ukraine, the continent’s demand for liquefied natural gas (LNG) has soared to unprecedented levels.

The US is now the world’s largest exporter of natural gas, yet political, economic and technical limits prevent the country from being its full-on savior.

While the industry is booming, lacking export capacity is bottle-necking supply to Europe and the rest of the world.

Meanwhile, climate groups insist the LNG export boom is a destructive way to deal with the energy crisis, and other paths are available to ensure global climate goals are met.

“This is a risky path forward in terms of our energy needs and in terms of our climate,” said Robin Schneider, executive director of the nonprofit group Texas Campaign for the Environment. Skyrocketing natural gas prices have slammed Europe since the continent has sought to break its dependence on Russian gas and the invading nation has restricted its pipeline flows.

Prices jumped 25% last week as Russia announced its Nord Stream 1 pipeline to Germany would supply only 20% of its normal capacity. In May, the country responded to European sanctions by fully halting gas flows to Europe through the Yamal pipeline.

European nations are scrambling to store enough gas as winter approaches. Fears abound that rations will need to be implemented for both households and businesses and that the energy crisis could induce a recession.

The continent relies on natural gas for home heating, as well as electricity and industrial production. Countries are enacting a number of initiatives to help households and businesses foot the bill, from Germany bailing out gas utilities to France nationalising its state-backed power company EDF.

To meet Europe’s natural gas demand, the US has solidified its spot as the world’s largest LNG exporter in the first half of 2022, according to the US Energy Information Administration (EIA).

The country’s average daily export surged 12% in the past six months to 11.2 billion cubic feet (bcf) per day. Displacing Asia as the top importer of US LNG, the UK and EU received 71% of those exports — and are paying a premium.

Poorer nations like Brazil or Bangladesh haven’t been able to compete with Europe at current cargo prices.

Some exporters have even broken contracts with poor countries to reroute fuel to Europe, reaping higher profits despite penalties.

According to Eugene Kim, research director at Wood Mackenzie’s Americas Gas research department, the US has emerged as one of the only secure LNG suppliers. Thought to be potential growth areas prior to Russia’s invasion of Ukraine, Australia and Western Africa’s gas industries have been limited by political and economic conflict. “The Qataris and North America are the only future growth areas of LNG supply,” Kim told DW.

But capacity issues on both sides of the Atlantic are limiting America’s ability to play the superhero.

While President Joe Biden promised in March to export more LNG to Europe, the industry is already maxed out. Additionally, due to reliance on pipelines from Russia, much of Europe lacks sufficient import infrastructure even if America could export more LNG. In the short term, US LNG exports are expected to drop significantly due to a June explosion at the Freeport LNG facility on the Gulf Coast.

But the US was unequipped to fuel Europe even before the Texas incident. “Prior to the Freeport LNG explosion in early June, US LNG was reaching capacity,” Kim said.

“Assuming everything is ramped up fully in 2023, we are still maxed out at 12 bcf a day. There is no new project that could substantially increase our LNG exports until the next wave of projects starts up,” he added.