EU-US LNG Agreement

LNG Allies Statement on EU-US Energy Security Agreement

President Biden and European Commission President von der Leyden outlined a bold EU-US agreement today to bolster European Energy Security, largely by increasing U.S. LNG trade. The agreement’s central concept—a joint EU-U.S. Task Force on Energy Security—is a direct response to the proposal put forward by LNG Allies, The U.S. LNG Association, in our letter to President Biden on Feb. 25, and our conversation with EU Energy Commissioner Simson earlier in the month. [EU-U.S. Joint Statement]

Fred Hutchison, CEO of LNG Allies made the following statements about elements of the agreement.

Joint Task Force. In a Feb. 25 letter to President Biden, LNG Allies, the American Exploration and Production Council, and other groups put forth the concept of a joint EU-U.S. Emergency Energy Infrastructure Council “to work with U.S. and European business interests to expand the long-term commercial relationships needed to ‘green-light’ additional U.S. LNG export capacity, European LNG receiving terminals, and associated pipelines on both sides of the Atlantic. The goal should be to have new ‘virtual transatlantic gas pipelines’ in place as soon as possible, but no later than the Winter 2022-2023 heating season.” [lngallies.com/energy-security]

Hutchison said: “Establishment of this Joint Task Force is recognition of the critical role U.S. LNG can play in reducing Europe’s dependence on unreliable Russian natural gas while meeting its net-zero by 2050 climate ambitions. We are excited that the United States and EU have responded favorably to our request to stand-up a joint task force and we pledge our full and enthusiastic cooperation.”

Reducing LNG’s Climate Footprint. The U.S. natural gas industry is fully committed to reducing the greenhouse gas intensity of its operations from upstream-to-export and is working both with the Biden administration on the direct regulation of methane and the EU Commission on its Methane Strategy.

Hutchison said: “U.S. LNG export project developers are implementing a variety of measures that will be addressed by the Joint Task Force, including reducing the greenhouse gas intensity of LNG infrastructure and associated pipelines, the use of clean natural gas and renewable energy to power onsite operations, and the rapid elimination of methane leaks from upstream-to-export. We’re in. We’re all in.”

Enabling Regulatory Environment. The United States commits to maintaining an enabling regulatory environment with procedures to review and expeditiously act upon applications to permit any additional export LNG capacities that would be needed to meet this emergency energy security objective.

Hutchison said: “Of the many positive statements in today’s announcement, the reaffirmation that the United States will ‘maintain an enabling regulatory environment’ is perhaps the most critical. Recent movement by the U.S. Department of Energy (DOE) to approve pending LNG export applications and yesterday’s decision by the Federal Energy Regulatory Commission (FERC) to postpone the new natural gas policy statements are clear evidence that U.S. government decision-makers understand the current global energy crisis which has been exacerbated by Russia’s war against Ukraine.”

Long-Term LNG Contracts. The EU Commission will support long-term contracting mechanisms and partner with the United States to encourage relevant contracting to support final investment decisions on both LNG export and import infrastructure.

Hutchison said: “We have repeatedly stressed to both U.S. and EU government officials the key role that they can play in encouraging the long-term LNG commercial contracts needed to secure debt and equity funding for U.S. LNG export and EU LNG import facilities. We helped the EU Commission and DOE organize a business-to-business LNG meeting in Brussels in 2019 and we hope that a second such B2B meeting will occur as soon as possible in 2022.”

Stable LNG Demand: The EU Commission will work with EU Member States toward ensuring stable demand for additional U.S. LNG until at least 2030 of ≈50 billion cubic meters per year (≈36 million tons per annum of LNG), on the understanding that the price formula of LNG supplies to the EU should reflect long-term market fundamentals… and should include consideration of Henry Hub pricing and other stabilizing factors.

Hutchison said: “Recognition that the EU will need and receive an extra 36 million tons per annum (mtpa) of LNG through 2030—in addition to the large volumes that the EU is already receiving—is a very, very big deal. Clearly the EU’s plan is to supplant Russian gas with U.S. LNG. We can do that in the near-term. There are at least ten U.S. LNG projects that are ‘shovel-ready’ and awaiting only long-term contracts.”