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LNG Turmoil: Firms In Europe Sign Mega-Contracts As Imports Of US Shale Gas Boom

European imports of US liquefied natural gas soared during the eight months that followed the Russia-Ukraine war, 148% higher compared to last year. A latest analysis displays that companies in the EU signed over a dozen contracts for US shale gas in the last two years.

This burgeoning regional industry is connected to buyers in Europe and finance. According to a recent analysis, firms in the EU have signed a minimum of 33 US LNG sale and purchase agreements since 2011, with 15 approved since 2021, including 10, a year ago. The agreements, the majority of which are for 20 years, including a host of private companies and financing from various public authorities in Europe.

The United States is, as of now, a safe haven for European fracking interests since the majority of countries in the EU banned the controversial practice due to concerns over the environment.

Thriving European Imports

These sorts of worries might appear slightly alarming to Europe. Soaring demand caused Europe to surpass Asia as the primary market for the import of US LNG in 2021. Till January 2022, 44% of European LNG supply was coming from the US.

Natural gas shortages aggravated with the lower Russian pipeline deliveries and caused a rise in purchases on the LNG "spot market" between winter 2021-2022. These loads came at a price in comparison to pipeline gas and turned into a significant contributing factor to the EU's energy-driven inflation.

After Ukraine's invasion by Russia, the European Commission and the US declared the Energy Security Task Force on March 25th, approving extra volumes of liquefied natural gas (LNG) for the European market of at the minimum 15bcm in 2022, with expected rises in the future. Within March 1st and October 31st last year, imports of US LNG in the EU climbed by 148% in contrast to last year during the same period.

France appears in the recent global US LNG import leader with 11.3bcm imported on 129 cargoes during the eight-month duration. This comprised the Dunkirk-bound Yiannis, which was the primary LNG tanker to leave the Venture Global Calcasieu Pass terminal in Louisiana on March 1st, 2023.

Europe Keen For LNG Agreements

LNG was one time a stress source in Brussels, with member states like Poland and Lithuania driving for new gas suppliers. Others, like Germany, increased twice fold on Russian pipeline imports by Nordstream 2 pipeline endorsement. The 2014 Energy Security Strategy resulted in the LNG import terminal funding in Cyprus, Lithuania, Poland, and Greece, with Poland’s Swinoujscie terminal itself acquiring €332 million in EU grants.

Since several member states prohibited fracking regionally amidst environmental and geological worries, EU firms secured the primary contracts for LNG import for US shale gas.

Louisiana's Cheniere Energy's Sabine Pass LNG export facility signed primary contracts with Gas Natural SDG in 2011 and Total in 2014. Spanish firms Iberdrola, Endesa, Gas Natural Fenosa (Naturgy), France's EDF and Portugal's EDP Energias inked the majority of their initial 20-year sale and purchase accords in 2014 for Cheniere's Corpus Christi terminal. The most significant LNG exporter and a publicly traded company in the US, Cheniere is backed by Vanguard, BlackRock and Fidelity.

The industry obtained an additional boost under the Trump administration, with US firms heavily lobbying to join the European market. An EU-US trade deal in 2018 supported the developing alliance. An EU Commission document stated that the deal hoped to advance crucial missing infrastructure and investment in Europe to enhance LNG access to make the US the top gas supplier for Europe. During the same year, Poland’s PGNiG inked 3 supply and purchase accords for US LNG.

One more LNG contract wave has followed. Norwegian, Swiss, French, German, and Dutch firms have all approved buying agreements since 2020, nearly duplicating the number of prior commitments. The majority of contracts begin in the mid-2020s and would move forward in the 2040s.

Extra export capacity might turn US's new role as the second largest LNG importer in the EU.  At present, LNG comprises upwards of 43% of the EU natural gas supply, with half arriving from the US.

According to the Procurement Resource article, the 2022 Russian-Ukrainian conflict prompted European firms to sign multiple contracts with American shale gas companies, which allowed Europe to overtake Asia as the major consumer of US LNG imports. This, coupled with favourable US-EU trade agreements and the European fracking restrictions, propelled the demand for American LNG imports.