Page 6 - GLNG Week 18 2022

GLNG COMMENTARY GLNG

EU softens stance on long-

term LNG supply deals

The EU is softening its stance on long-term LNG supply
deals as it urgently seeks alternatives to Russian gas,

EUROPE The European Union’s scramble to wean itself Among those committing to new long-
off Russian gas is driving various changes in the term LNG purchases is France’s Engie, which
WHAT: bloc’s energy policies both in the shorter and increased the volume and duration involved
The EU has become more longer term. One of the changes that is becoming in its offtake agreement with the US’ Cheniere
open to new long-term increasingly apparent is a new openness in the Energy. The French company is now set to by
supply deals for LNG, EU to long-term deals to purchase LNG from the 900,000 tonnes per year of LNG from Cheniere
especially from the US. US and other non-Russian sellers. over a 20-year period, up from 0.4-1.2mn tpy
This represents a policy shift, as the EU had over an 11-year period under the initial sale
WHY: previously been resistant to locking in new fossil and purchase agreement (SPA) between the two
The war in Ukraine fuel supplies for years to come at the same time companies.
has made phasing out as it was trying to accelerate its decarbonisation This week, Engie also struck a new SPA with
Russian gas one of the efforts. The war in Ukraine has by no means the US’ NextDecade. This deal is notable because
bloc’s top priorities. dampened the appetite for decarbonisation Engie had previously pulled out of talks with
– indeed the EU and others have argued that NextDecade in 2020 over environmental con-
WHAT NEXT: increased renewable capacity would also help cerns, and reportedly under pressure from the
It will ultimately be down to reduce dependence on oil and gas from Rus- French government. France’s concerns centred
to companies to sign sia. However, current events are prompting the on the use of hydraulic fracturing to produce
offtake agreements, but bloc to take a more flexible approach to sourcing the shale gas used as feedstock for US LNG even
they will encounter less energy, at least in the shorter term, by making as the technique has been banned in France for
political resistance. reducing dependence on Russia the immediate 11 years. But the fact that Engie had struck its
goal, ahead of the phasing out of fossil fuels. original deal with Cheniere last year – before the
A similar shift can be seen in the US, where war in Ukraine bolstered Europe’s appetite for
the administration of US President Joe Biden US LNG – illustrates that environmental con-
took office last year pledging to focus on the cerns have increasingly been edged out by rising
energy transition but is now committed to sup- energy demand.
plying as much LNG as it can to Europe over Other buyers committing to more US LNG
the coming decade. In late March, the Biden include Shell, which signed a new deal in March
administration announced that it would work for an additional 2mn tpy of the super-chilled
with international partners to deliver at least an fuel from Venture Global LNG. This is in addi-
additional 15bn cubic metres to the EU this year. tion to the 2mn tpy that Shell is already buying
Deliveries to the bloc would then be ramped up from Venture Global, which brought its first
over the coming years, with the goal of supply- LNG export terminal on the US Gulf Coast into
ing an additional 50 bcm of US LNG per year service this year and is working towards a final
by 2030. investment decision (FID) on a second plant
Reaching this goal will be contingent on nearby.
buyers and sellers striking the requisite offtake
agreements and building the necessary infra- What next?
structure. But where such moves were previ- Presenting US LNG as an attractive alterna-
ously at greater risk of running into resistance tive to Russian pipeline gas was something the
from governments, they are now more likely to administration of former US President Donald
proceed with political support. Trump had pursued, with limited success. Some
European buyers, including Poland’s PGNiG,
Doing deals did sign offtake agreements with US LNG pro-
Since Russia invaded Ukraine in late Febru- ducers in the days of the Trump administra-
ary, triggering severe sanctions against Moscow tion, which left office at the start of 2021, but
and prompting European countries to rethink others remained resistant, focusing instead on
their dependence on Russian energy imports, renewables.
several Europe-based companies have moved to In the wake of the war in Ukraine, though,
seek new LNG supplies. energy transition goals are being viewed

P6 www. NEWSBASE .com Week 18 06•May•2022