Page 6 - NorthAmOil Week 18 2022

NorthAmOil COMMENTARY NorthAmOil

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, having previously been

more resistant to ongoing commitments to buy fossil fuels

EU-US THE European Union’s scramble to wean itself administration announced that it would work
off Russian gas is driving various changes in the with international partners to deliver at least an
WHAT: bloc’s energy policies both in the shorter and additional 15bn cubic metres to the EU this year.
The EU has become more longer term. One of the changes that is becoming Deliveries to the bloc would then be ramped up
open to new long-term increasingly apparent is a new openness in the over the coming years, with the goal of supply-
supply deals for LNG, EU to long-term deals to purchase LNG from the ing an additional 50 bcm of US LNG per year
especially from the US. US and other non-Russian sellers. by 2030.
This represents a policy shift, as the EU had Reaching this goal will be contingent on
WHY: previously been resistant to locking in new fossil buyers and sellers striking the requisite offtake
The war in Ukraine fuel supplies for years to come at the same time agreements and building the necessary infra-
has made phasing out as it was trying to accelerate its decarbonisation structure. But where such moves were previ-
Russian gas one of the efforts. The war in Ukraine has by no means ously at greater risk of running into resistance
bloc’s top priorities. dampened the appetite for decarbonisation from governments, they are now more likely to
– indeed the EU and others have argued that proceed with political support.
WHAT NEXT: increased renewable capacity would also help
It will ultimately be down to reduce dependence on oil and gas from Rus- Doing deals
to companies to sign sia. However, current events are prompting the Since Russia invaded Ukraine in late February,
offtake agreements, but bloc to take a more flexible approach to sourcing triggering severe sanctions against Moscow and
they will encounter less energy, at least in the shorter term, by making prompting European countries to rethink their
political resistance. reducing dependence on Russia the immediate dependence on Russian energy imports, several
goal, ahead of the phasing out of fossil fuels. Europe-based companies have moved to seek
A similar shift can be seen in the US, where new LNG supplies.
the administration of US President Joe Biden Among those committing to new long-
took office last year pledging to focus on the term LNG purchases is France’s Engie, which
energy transition but is now committed to sup- increased the volume and duration involved
plying as much LNG as it can to Europe over in its offtake agreement with the US’ Cheniere
the coming decade. In late March, the Biden Energy. The French company is now set to by

P6 www. NEWSBASE .com Week 18 05•May•2022