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The Marvel Crane is a liquid natural-gas carrier at an LNG terminal in Hackberry.US Coast Guard/Flickr
This story was first published by Yale E360 and is reproduced here as part of the Climate Desk collaboration.
In the span of weeks, Russia’s war on Ukraine has created millions of refugees, transformed the geopolitical landscape, upended global energy markets and food supply chains, and hastened Europe’s efforts to transition away from fossil fuels. The war threatens to change the trajectory of the United States’ energy and climate policy.
President Biden and President Ursula von der Leyen, the President of the European Commission, met in Brussels on March 25, one month after Russia launched their invasion. Announcement a new initiative to help Europe reduce its reliance on Russian fossil fuels. Their plan calls for boosting exports of liquefied natural gas (LNG) from the US to the European Union by 15 billion cubic meters this year and as much as 50 billion cubic meters—a third of what Europe currently buys from Russia—by 2030.
Officials in the Biden administration described the LNG surge as a temporary measure to aid Europe in the next few years, until it can develop more renewable energy and make its buildings more energy efficient. However, energy analysts believe that the announcement could signal a shift toward more support for expanding gas infrastructure and potentially locking in significant new sources.
New LNG terminals—whether for export on the US Gulf Coast or for Import on Germany’s North Sea coast—would take several years and several billion dollars to build. Analysts believe that the geopolitical environment will change by the time the terminals are operational. However, climate change will be more urgent than ever. There will also be strong business incentives to keep them operating.
“Europe needs more US LNG to get through the next two winters, not incentivization to use gas for the next 20 years,” said Claire Healy, of the energy think tank E3G, in a statement. “It has turned a short-term energy crunch into a long-term crutch for American oil and gas producers.”
Some experts in energy warn that the expansion of LNG infrastructure could lead to a loss of energy security in the US and EU. They recommend that countries focus on energy efficiency and other ways of reducing gas demand, rather than increasing supply through the construction of LNG projects.
Even with new terminals, LNG from the US won’t be able to replace the massive volume of gas that Europe imports from Russia, either today or in 10 years, said Maria Pastukhova, a Berlin-based senior policy advisor with E3G. “That’s why the focus on demand is so crucial.”
Two recent analyses contend that the US can help Europe shut off the spigot of Russian gas within the next few years while also resisting the industry’s calls to expand gas infrastructure.
New US LNG export facilities aren’t needed to meet the Biden-EU targets, according to Clark Williams-Derry of the Institute for Energy Economics and Financial Analysis (IEEFA). He is the author of a recently published Analyse showing that the combined capacity of the LNG export terminals in the US currently operating and under construction is more than sufficient to reach the aim of an additional 15 billion cubic meters by the end of 2022 and 50 billion by 2030.
“They were already on track to blow through that goal of 15 billion cubic meters this year, and maybe even get close to the 50 billion cubic meter target this year,” Williams-Derry said, referring to US LNG exporters. “Which means that the goal itself doesn’t add anything new to the conversation.”
Another Report, produced by E3G in collaboration with several other energy think tanks, outlines near-term measures that can be taken to slash Europe’s demand for gas. The analysis found that Russia could reduce its gas imports by up to two thirds by electrifying heating and industrial processes and improving energy efficiency. This would decrease the US need to export as much gas.
The US is as it is. To be expected to become the world’s largest exporter of LNG this year. It has six LNG export terminals, which together move approximately 1.2 million tonnes of LNG. 100 billion cubic meters of gas per year. These facilities—designed to shrink natural gas to a volume 600 times smaller by supercooling it into liquid form—were built to take advantage of the enormous glut of gas unlocked from shale formations since drillers started deploying fracking technology in the mid-2000s.
Two more terminals are on the way: Calcasieu Pass on Louisiana’s Gulf Coast and Golden Pass, located about 50 miles west on the Sabine River just south of Port Arthur, Texas. An Analyse from EIA projects that, with new gas liquefaction facilities already under construction and growing foreign demand for gas, US LNG exports will exceed 165 billion cubic meters by 2033.
Long before Russia’s war on Ukraine, there were growing concerns that additional LNG export terminals would lock in climate-warming pollution for decades to come. A Report published by the Natural Resources Defense Council estimated that greenhouse gas emissions from the full process of extracting, processing, transporting, and liquefying natural gas will be equivalent to the emissions of up to 45 million cars by 2030. Leaks of methane—a potent greenhouse gas trapping 80 times as much heat as carbon dioxide over a 20-year time span—account for a large portion of those emissions.
The US was the leader in launching the Global Methane Pledge, which saw more than 100 countries pledge to reduce their methane emissions by 30% by 2030, at the UN climate conference in Glasgow last fall. Climate advocates are pushing the Biden administration to explain how it intends to reconcile that call to action—and its own climate Targets of halving greenhouse gas emissions over the next decade—with the plan to boost gas exports out to 2030.
The Intergovernmental Panel on Climate Change’s most recent report makes it clear that no new fossil fuel infrastructure can be built if the world is to stay under 1.5 degrees Celsius of warming. Investing in any new fossil fuel development, said United Nations Secretary-General Antonio Guterres on the day of the report’s release, “is moral and economic madness.”
Climate advocates find it disturbing to see Jennifer Granholm (US Secretary of Energy) and other Biden Administration officials ask oil and natural gas companies to increase production in order to counter rising prices and strengthen European ties. “Clearly LNG is a big part of this equation,” Granholm told energy executives assembled for a conference in Houston in March. “We have got to do our part to ensure that others are not hurting.” She pledged that the administration would look at ways to “collapse the bureaucracy” around permitting for new projects.
The American Petroleum Institute, and the Center for Liquefied Natural Gas, both trade associations representing the industry, were quick and enthusiastic to celebrate the Biden/EU deal. They used it to intensify their longstanding push for more natural-gas infrastructure and fewer regulatory hurdles. “We stand ready to work with the administration to follow this announcement with meaningful policy actions to support global energy security,” Mike Sommers, CEO of the American Petroleum Institute, said in a statement, “including further addressing the backlog of LNG permits, reforming the permitting process, and advancing more natural gas pipeline infrastructure.”
Although the industry has complained of burdensome regulations, a dearth of federal permits does not prevent new LNG terminals or supply lines from being developed. The Federal Energy Regulatory Commission, and Department of Energy approved 13 different liquefaction projects. However, they have yet to break ground due to inability of their developers to secure financing.
Building new LNG facilities—which include pipelines to supply natural gas, liquefaction units to chill it to minus 260 degrees F, and specialized docks for loading it onto 1,000-foot-long tanker ships—is a long and expensive undertaking. Before footing the bill for construction, banks typically want to see a slate of long-term contracts with foreign buyers that accounts for most of a project’s future gas output.
In recent years, investors have been cautious due to the Covid-induced natural gas demand crash in 2020 and the risk of climate policies later this decade reducing long-term demand in many market segments. “The infrastructure you start now may wind up being an albatross in three or four years,” said IEEFA’s Williams-Derry.
Proposed LNG export infrastructure won’t be sending gas to Europe any time soon. But governments could push to change this.
Energy analysts believe that if policymakers move to support new gas infrastructure, this could hamper investments in clean and efficient energy in the US and Europe. Pastukhova is concerned that governments might provide loan guarantees to their development banks and press them to finance new LNG project investments. These risks are due to the mismatching timelines of 20 year-contracts required of investors in LNG terminals, and the looming deadlines for reducing emissions by 2030.
“If this happens and governments give in to the push by industry, we end up with public finance sunk into assets that are stranded from the beginning, leaving much less space to invest in the accelerated energy transition,” Pastukhova said. “And we really need every cent of this public finance for that transition.”
As the evidence of brutal attacks on Ukrainian civilians by Russian forces mounts by the day, the pressure on European leaders—particularly in Germany, which is heavily dependent on Russian gas—to impose an embargo on Russian energy imports is mounting. European countries Send Gazprom and other government-controlled firms in Russia about $850 million for gas and oil every day. In early April, the EU’s top diplomat that since Russia’s invasion began, the EU has sent 35 billion euros to Russia for energy, while it has sent just 1 billion euros in aid to Ukraine.
Experts believe that the multiple imperatives to cut emissions, support allies abroad, and achieve energy security at the home all point to the same answer: less natural gas.
“There is this very traditional perception of energy security as security of supply,” Pastukhova said. “But what’s happening in energy markets is this emerging understanding that it’s about security of both supply and demand.”
Research from Jesse Jenkins, an assistant professor and energy systems expert at Princeton University, suggests that while increasing and rerouting LNG shipments to Europe will help now, implementing the climate-focused elements of Biden’s long-stalled Build Back Better bill would enable more robust support for Europe’s struggle to wean itself off Russian gas over the next few years.
Jenkins and his colleagues calculated the impact of a clean-energy investment package similar to the one in the bill. They found that it would reduce domestic gas consumption by 57 billion cubic metres by 2028. That, in turn, would free up US natural gas supplies for export using existing LNG infrastructure—giving European policymakers the confidence to pivot away from Russian energy, while insulating US consumers and businesses from global price shocks resulting from increased demand.
High natural gas prices could make rising LNG exports to 2030 economically and politically unsustainable without such steps. Williams-Derry explained that the recent rise in LNG exports is one reason natural gas prices have risen.
“Ultimately we solve this on the demand side,” Jenkins said. “And we do it by making alternatives on the demand side better—cheaper, better, more convenient—in the context of a large investment package in clean energy, and in accelerating US demand away from oil and gas. And in a context where the EU is doing the same thing.”
