July 2024
Why the EU needs US liquefied natural gas About this brief Written by John M. Roberts Nonresident senior fellow Atlantic Council Global Energy Center Senior partner Methinks Ariel Cohen Nonresident senior fellow Atlantic Council Eurasia Center Senior fellow International Tax and Investment Center Managing director Energy, Growth and Security Program International Tax and Investment Center July 2024
The Atlantic Council Global Energy Center develops and promotes pragmatic and nonpartisan policy solutions designed to advance global energy security, enhance economic opportunity, and accelerate pathways to netzero emissions.
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Introduction Europe is facing tough choices as it confronts Russia’s unexpected reentry into European gas markets in the form of steadily increasing deliveries of liquefied natural gas (LNG). A fourteenth round of sanctions adopted in June are designed to help curb these supplies. At the same time, Europe risks gas shortages if there are no alternative LNG supplies on hand. This fraught situation puts pressure on the Joe Biden administration to resume issuing fresh permits for LNG projects intended for export to countries with which the United States does not have a free trade agreement (FTA). Currently, the United States has no FTA with any European country. And although a judge recently ordered the administration to resume permitting, it could appeal the decision, leaving the fate of additional projects in limbo.
The EU’s gas balance: Stability or uncertainty? For the EU, the question is always whether the glass is half full or half empty. As of April 2024, with high gas storage levels in most of the EU—Poland excepted—and with low gas prices and steady incoming flows of LNG, the EU’s energy supplies appear secure. This status has been due to factors such as demand destruction among industrial users in 2022 and 2023, and two consecutive mild winters. However, demand destruction is no longer an option in this era of highly uncertain weather conditions. Global heating prompts massive vagaries in weather patterns, making it far from certain whether Europe—as a whole or just the EU—can take the stability of the past two years for granted. A recent white paper published by Argus noted that “unplanned supply disruptions or an unexpectedly strong rebound in demand have the potential to significantly alter the balance, particularly now that Europe has replaced Russian gas dependence with a reliance on LNG secured on the spot market.” 1
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Europe’s dilemma: Energy security and Russian imports Adding to the potential for greater destabilization in European energy markets are uncertainties in regional geopolitics and growth in global and EU gas demand. These factors could contribute to European backsliding on cutting Russian gas imports, a turn Europe cannot afford, as every dollar or euro spent on Russian gas supports its war in Ukraine. Geopolitical uncertainties include an escalation of Russian aggression in Ukraine, Russian attacks on other European countries such as Moldova or the Baltic states, continued threats to shipping in the Red Sea, and the possibility, given Israeli-Iranian tensions, of renewed threats to energy shipping in the Gulf. In any of these scenarios, the ability for Russia to step in and revive gas exports to European countries desperate for energy supplies should not be ignored. Another factor at play is the continued transit of Russian piped gas through Ukraine. In 2023, 15 billion cubic
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