Geopolitical developments and market shifts mean US LNG will be a vital component in Europe's energy strategy and decarbonisation efforts.
Source: Petroleum Economist
The EU has made LNG a key component of its energy strategy as it seeks to diversify its gas supplies and reduce reliance on Russian imports.
The targeted expansion in the continent’s LNG import capacity of another 30bcm by2030 clearly indicates the bloc’s determination to bolster energy security, but LNG's future in Europe depends on balancing short-term energy security needs with long-term decarbonisation goals.
Across the Atlantic, US LNG is becoming increasingly foundational to global markets, and especially so for Europe as it strives for a sustainable transition away from fossil fuels.
European nations are diversifying their energy sources in accordance with decarbonisation objectives. Additionally, rising geopolitical tensions in the wake of Russia’s 2022 invasion of Ukraine have heightened concerns about energy security. These initiatives continue to restructure supply networks and influence legislative and policy decisions.
The recent Gastech conference in Houston featured advancements in LNG, hydrogen and climate technologies. Industrial cooperation, emphasising cross-sector partnerships to quicken the energy transition, was a recurring theme.
Industry cannot avoid policy and political debates, especially during a US election year. The potential impact of the Biden administration's recent LNG restriction plan was a never-present topic at Gastech. A historic federal court decision overturned the administration's freeze on new LNG export approvals in July 2024, allaying industry worries about possible expansion restrictions. In response, Biden announced his government’s intention to review the legal underpinnings of its export policy in August2024 and filed a notice of appeal. In parallel, as part of a wider review to balance environmental and energy security concerns, the Department of Energy is upgrading its economic and environmental assessments for LNG export projects.
The US election is drawing the attention of every actor in the energy sector. Biden’s clean energy projects and climate promises are expected to be carried on by a Harris government, with a focus on lowering greenhouse gas (GHG) emissions. This could result in more-stringent laws governing LNG exports, which might impede the expansion of the LNG market in the US. In addition, Harris has suggested imposing a" climate pollution fee" on GHGs. This could lead to higher production and export expenses, intensifying the financial strain on the industry.
Simultaneously, the Harris campaign has been outspokenly critical of Russia, suggesting energy sanctions on Moscow may continue and even tighten.
The Trump campaign has made it clear the former president sees unleashing the full potential of the US’ energy reserves as key to reducing inflation and enhancing the country’s competitive position at home and abroad while denying revenue to regional disrupters such as Iran.
Presence and pricing
Europe’s unfolding energy transformation has significantly impacted policy beyond the continent and the US. Global LNG trade has increased by 2.1%, to reach 401mt. With this growth, 51 importing markets are connected to 20 exporting countries. With84.53mt exported, the US became the world’s biggest LNG producer and exporter in2023, surpassing Australia and Qatar. This competitive environment is reflected in pricing movements. For example, the Platts Japan-Korea Marker averaged $13.86/m Btu in 2023, while European LNG prices reached a five-month high of $10.445/m Btu in May 2024.
LNG is critical in supporting Europe's energy security while easing the shift to more environmentally friendly energy sources. "The strategy is to expand through the whole value chain to grow our LNG market presence in Europe," said Benjamin Lakatos, CEO of the MET Group, a European energy company headquartered in Switzerland.
Geographic diversification and infrastructure investment are important elements of this strategy. MET established itself as a regionally diversified importer by delivering more than 30TWh of LNG to different European countries in 2023.Furthermore, MET has obtained a long-term capacity of 1bcm/yr at the recently finished floating LNG import terminal in Lubmin, Germany. The terminal has a total capacity of 5.2bcm/yr. Diversification, infrastructure development and the US LNG supply to enable it are integral to MET Group's LNG market presence in Europe.
By February 2024, LNG receiving capacity across 47 markets had increased to1,029.9mt/yr, with Europe seeing the greatest expansion. Notably, MET and Shell signed a ten-year agreement to import LNG from the US. Worldwide liquefaction capacity is expected to surpass 700mt/yr by 2030.
"The LNG industry, including the US, is focused on being present in all three key regions—Europe, Asia and the US," said Lakatos. Long-term competitiveness in the global energy trading market will be a challenge for enterprises not participating in all three. Even while a zero-emission future is plausible, it will still be 50–70 years away. Meanwhile, Europe needs to address its energy supply issues today.