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US ‘pause’ on new LNG exports undermines the energy security of its European allies

The US administration’s decision to suspend the granting of permits for new liquefied natural gas (LNG) export terminals will have major consequences for the energy security of the EU

By: EBR - Posted: Friday, February 23, 2024

We should not repeat that error: US LNG is essential now for Western security for decades to come, and our leaders must say so and not stay quiet just for an easier life. Complacency today will preface crises tomorrow.
We should not repeat that error: US LNG is essential now for Western security for decades to come, and our leaders must say so and not stay quiet just for an easier life. Complacency today will preface crises tomorrow.

By Andrea Di Giuseppe*

The US administration’s decision to suspend the granting of permits for new liquefied natural gas (LNG) export terminals will have major consequences for the energy security of the EU.

In the past two years, since Russia’s invasion of Ukraine, the energy security of the European Union, and Italy in particular, has been under greater stress than at any time in recent history. The good news is that Europe has risen to the challenge.

The decision was taken to reduce reliance on Russian gas as quickly as possible, and the efforts have been surprisingly successful in a short period of time. Russian gas’ share of Europe’s energy mix fell from 41% in 2022 to just 8% in 2023. In some countries it is even lower.

An essential element of this transition was the impact of American liquified natural gas (LNG). In the first half of 2023, the US exported more liquefied natural gas than any other country – 11.6 billion cubic feet a day. That same year, 60% of US LNG exports were delivered to Europe and 46% of European imports came from the US. This market is extraordinarily new – US exports of LNG were at zero as recently as 2015.

It is clear that the conditions now exist for long-term transatlantic energy deals to be put into place that would guarantee Europe a reliable and friendly source of gas for decades to come. The US, for its part, would gain billions in revenues, tens of thousands of jobs, and strengthen its global position at the expense of other energy providers such as Russia, and China.

However, this hoped-for win-win may never come to pass. A recent decision by the Biden Administration has placed a ‘pause’ on issuing new LNG export terminal permits. Expansion and construction will stop; exports will plateau, at best; future European demand will not be met.

President Biden’s decision is a hammer-blow to the hope of long-term security and prosperity. The long-term is the only frame with which to approach a discussion on strategic energy resources, such as gas. Some EU officials have sounded unconcerned when speaking publicly about ‘the next 2-3 years’ – but energy security cannot possibly be measured in such short timelines.

The LNG infrastructure being built in Italy and elsewhere (Germany, UK, Netherlands) represents tens of billions of Euros of investment, thousands of jobs. All of that will only succeed if long-term stable contracts can be agreed with US suppliers.

When it comes to stability and reliability along supply chains, trade is best done among close friends and trusted partners. Energy security’ needs reliable, long-term supply at consistent prices and is best provided by geopolitical allies. That looks to be within reach.

European companies, most recently Germany’s state-owned SEFE, have signed such long-term contracts, but they are dependent on new facilities being built in the U.S. to handle future demand. The recent U.S. decision puts it all at risk, just as Europe’s transition away from relying on volatile neighbours is almost complete.

European leaders must make their case to President Biden and his team: privately and publicly. Put bluntly, the block on new permits undermines the Western alliance and leaves Europe with unpalatable decisions, in the near future.

Rewinding the clock and returning to Russian gas dependence is not an option. Other options are also not appealing: Qatari gas is surrounded by conflict and challenging supply conditions; renewables have not yet reached sufficient scale; coal is too polluting and politically untenable.

The fault lies with the Biden Administration’s prioritizing of domestic politics, over international security. The policy decision is a bad one, and should be reversed. But in Europe, we are not blameless, the years of addition to Russian hydrocarbons were a mistake, and too many leaders stayed silent for too long.

We should not repeat that error: US LNG is essential now for Western security for decades to come, and our leaders must say so and not stay quiet just for an easier life. Complacency today will preface crises tomorrow.

*President of the Committee on International Trade of the Foreign Affairs Commission of the Chamber of Deputies (Italian Parliament)
**first published in: Euractiv.com

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