The US replaces Russia in the European natural gas market
In 2022, exchanges and flows in the energy sector were fundamentally disrupted.
Europe, already in the grip of a difficult-to-manage post-Covid economy, plunged further into crisis after the invasion of Ukraine in February. Remember that even before the Europeans imposed sanctions on Russia’s energy sectors, Moscow cut natural gas supplies to the old continent in the hope of breaking European and transatlantic will to support Ukraine…
To cope with this, the Europeans turned to massive imports of American liquefied natural gas (LNG). Other strategies, such as cutting consumption and switching to coal or renewable energy, have compensated for Russian gas cuts, but it has been American LNG that has filled much of the gap. Full price. While most US LNG contracts allow buyers to easily sell cargoes and divert ships to higher-paying customers, many Asian buyers, particularly China, have sold LNG back to Europe for a profit. Higher prices have helped to secure Europe’s gas supply, but of course also pushed up household and business costs.
17% of the gas we imported last year
Thus, American LNG accounted for 17% of total European gas imports in 2022, and 19% of Russian gas. Other countries, including Norway, Azerbaijan and Qatar, have also increased their exports to Europe, adding a combined 28 billion cubic meters (bcm, a unit of measurement of gas volume) of LNG in 2022. But the United States contributed 37 billion cubic meters more than all other sources combined. combined. In December 2022, US LNG exports to Europe and the UK thus reached 42% of total imports to Europe.
Also read from the same author: There is no ecologically responsible war
The transition from Russian gas to American gas is fundamentally changing world trade in gas in particular and energy in general. From now on, Europe’s energy security depends on these American natural gas exports. With the crisis that has been feared since late summer averted, decision makers are now preparing for this major energy restructuring. First observation: Cooperation (or dependence) between the United States and Europe is becoming essential to Europe’s energy security, and therefore to the security and prosperity of Europe as a whole. For decades, the flow of natural gas from Russia to Europe seemed immune to geopolitical tensions. Even during the cold war. After the collapse of the USSR, gas trade played a key role in Russia’s integration into the American-dominated global economy. It was also a key pillar of the old continent’s geopolitical security strategy: to stabilize Russia and create a peaceful economic dependency thanks to its export revenues. In 2021, at least six gas pipelines have been connected, including Nord Stream 1 and 2, which will supply Europe and Russia with 140-170 billion cubic meters per year, i.e. 40% of Europe’s natural gas demand. Even as Europe prepares for the transition to low-carbon energy, Russian gas would remain the cornerstone of Europe’s energy security for a long time.
Auf wiedersehen, Gazprom!
However, from the fall of 2021, the flow of Russian gas to Europe began to decrease. After the invasion of Ukraine, Germany refused to license the Nord Stream 2 project, and Gazprom further reduced the flow through Nord Stream 1. Later, after a sabotage in September 2022, flows through Nord Stream 1 stopped completely. Now the import of Russian gas is only a quarter of what it was two years ago.
In March 2022, the Biden administration and the European Commission agreed to expand gas trade between the US and the EU by at least 50 billion cubic meters per year by 2030. The United States has started an additional 15 billion cubic meters of gas in 2022, and the goal was reached in September last year. . Market dynamics always drive infrastructure investment on the US side. However, the Biden administration’s commitment should allay fears that U.S. policymakers may limit exports to lower natural gas prices in their domestic markets or for climate reasons. A renewed agreement on energy security between the EU and the US in November stipulates that Europe will import up to 147 billion cubic meters of LNG in 2023. European power companies have signed contracts for 11 Floating Storage and Gasification Units (FSRU). By the end of 2023, the regasification capacity is more than 55 billion cubic meters per year. The expansion has been fueled by subsidies to electric utilities, public procurement (four of which were bought by the German government) and accelerated permitting.
New import opportunities and gas pipeline expansion will restructure the European gas market. A large part of this infrastructure is also being built with the aim of switching to biogas or hydrogen. Europe’s energy mix will emerge from this crisis more diverse than ever, with new import sources, new entry points, new delivery routes and new types of energy.
We can put it quite plainly – some observers just can’t! – gas supply has become a geopolitical weapon. In fact, this has been the case for a very long time. It is even possible that the natural gas trade relationship between Berlin and Moscow has weakened NATO for too long. These relations were also able to reassure Moscow for a while about the hypothetical integration of Ukraine into the North Atlantic alliance. At a time when the country is so dependent on Russian gas, it was very difficult for Germany to give its blank check to such an initiative…
For a long time, we have been witnessing a giant game of fools, in which each thinks that he is the smartest and the other is the one who is too dependent on his commitment. After that, whatever the outcome of the war in Ukraine, and for many years to come, Russia will not have such an effective strategic tool as Germany and Central Europe’s dependence on natural gas.
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