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Why US gas can't solve Europe's energy crisis

Teddy Ostrow
August 1, 2022

European demand has kicked the US LNG industry into high gear, but its capacity is too low and the climate is being caught in the crossfire.

A picture of the Arctic Voyager LNG tanker setting in the port of Rotterdam
LNG terminals, like the one in Rotterdam, are still few and far between in EuropeImage: Lex van Lieshout/ANP/AFP/Getty Images

As Europe weans itself off Russian energy as punishment for Moscow's invasion of Ukraine, the continent's demand for liquefied natural gas (LNG) has soared to unprecedented levels

The US is now the world's largest exporter of natural gas, yet political, economic and technical limits prevent the country from being its full-on savior. While the industry is booming, lacking export capacity is bottlenecking supply to Europe and the rest of the world.

Meanwhile, climate groups insist the LNG export boom is a destructive way to deal with the energy crisis, and other paths are available to ensure global climate goals are met.

"This is a risky path forward in terms of our energy needs and in terms of our climate," said Robin Schneider, executive director of the nonprofit group Texas Campaign for the Environment.

Energy crisis in Europe

Skyrocketing natural gas prices have slammed Europe since the continent has sought to break its dependence on Russian gas and the invading nation has restricted its pipeline flows.

Prices jumped 25% last week as Russia announced its Nord Stream 1 pipeline to Germany would supply only 20% of its normal capacity. In May, the country responded to European sanctions by fully halting gas flows to Europe through the Yamal pipeline.

European nations are scrambling to store enough gas as winter approaches. Fears abound that rations will need to be implemented for both households and businesses and that the energy crisis could induce a recession.

The continent relies on natural gas for home heating, as well as electricity and industrial production.

Countries are enacting a number of initiatives to help households and businesses foot the bill, from Germany bailing out gas utilities to France nationalizing its state-backed power company EDF.

A picture of the construction site for an LNG terminal in Wilhelmshafen, Germany
Germany is rushing to build its first floating regasification terminal for LNG at WilhelmshafenImage: Sina Schuldt/dpa/picture alliance

US to the rescue?

To meet Europe's natural gas demand, the US has solidified its spot as the world's largest LNG exporter in the first half of 2022, according to the US Energy Information Administration (EIA).

The country's average daily export surged 12% in the past six months to 11.2 billion cubic feet (bcf) per day. 

Displacing Asia as the top importer of US LNG, the UK and EU received 71% of those exports — and are paying a premium. Poorer nations like Brazil or Bangladesh haven't been able to compete with Europe at current cargo prices. Some exporters have even broken contracts with poor countries to reroute fuel to Europe, reaping higher profits despite penalties.

According to Eugene Kim, research director at Wood Mackenzie's Americas Gas research department, the US has emerged as one of the only secure LNG suppliers. Thought to be potential growth areas prior to Russia's invasion of Ukraine, Australia and Western Africa's gas industries have been limited by political and economic conflict.

"The Qataris and North America are the only future growth areas of LNG supply," Kim told DW. 

But capacity issues on both sides of the Atlantic are limiting America's ability to play the superhero. 

While President Joe Biden promised in March to export more LNG to Europe, the industry is already maxed out. Additionally, due to reliance on pipelines from Russia, much of Europe lacks sufficient import infrastructure even if America could export more LNG. 

In the short term, US LNG exports are expected to drop significantly due to a June explosion at the Freeport LNG facility on the Gulf Coast.

A picture of smoke billowing from the Freeport LNG plant in Quintana, Texas
The Freeport explosion will disrupt about one-fifth of the US' natural gas export capacity until late 2022 or early 2023Image: Maribel Hill via REUTERS

But the US was unequipped to fuel Europe even before the Texas incident. "Prior to the Freeport LNG explosion in early June, US LNG was reaching capacity," Kim said.

"Assuming everything is ramped up fully in 2023, we are still maxed out at 12 bcf a day. There is no new project that could substantially increase our LNG exports until the next wave of projects starts up," he added.

The existing capacity is largely tied up in long-term contracts with non-European nations, and the next wave of export infrastructure will not come online until 2024 or later. Even then, Kim explained that would not be enough capacity to fuel Europe.

Beyond capacity limitations, US consumer and business groups are resistant to the higher prices resulting from ramping up US LNG exports. 

Paul Cicio, CEO of the manufacturer trade group Industrial Energy Consumers of America, told the Wall Street Journal that "the American consumer, the American economy, the American national security is at risk unless we maintain surplus inventory."

Indeed, prices have soared as the use of air conditioners during recording-breaking heat waves upended the loss in demand expected from the Freeport explosion, which kept gas intended for export in storage in the US. The EIA recently reported that US inventories are 12% lower than the five-year average for this time of year. 

Climate goals thrown under the bus

US gas is also receiving domestic and international resistance on the climate front.

Climate groups argue that the expansion of LNG infrastructure necessary to increase exports would mean reneging on existential goals to reduce fossil fuel emissions.

"A big concern is that LNG export companies are using [Europe's energy crisis] as an excuse to try and rush new export terminals through the permitting process and also avoid air pollution laws," said Schneider of Texas Campaign for the Environment.

Climate activists point out that LNG accounts for a third of the US's carbon emissions, including nearly half of its methane emissions. The Intergovernmental Panel on Climate Change has labeled methane, which is an especially potent greenhouse gas released by the fracking process, as a key driver of the climate crisis.

A picture of a worker who helps monitor water pumping pressure and temperature, at a hydraulic fracturing and extraction site
Fossil fuel companies are framing LNG as having low carbon emissions, branding its products 'responsibly sourced gas'Image: Brennan Linsley/AP Photo/picture alliance

Further, research has shown that the natural gas extraction and liquefaction processes can be exceedingly dangerous and polluting. 

In addition to methane, fracking can release cancerous and other harmful chemicals in the facilities' surrounding environment, which are disproportionately poor, Black and brown communities.

The liquefaction process also risks fires and explosions like the one at the Freeport LNG facility in Texas.

Schneider told DW the Freeport explosion is "an example of why this is dangerous stuff. We're scared and it could have been so much worse."

Despite the climate risks, the EU has moved to include natural gas in its list of sustainable investments, and US gas exporters have signed a flurry of contracts to meet European demand. 

According to Kim, there's been a shift in Europe's energy priorities.

"Energy transition used to be a very big theme, but now energy security has crept in to supersede it. Let's get our energy security first, then tackle energy transition," Kim explained.

Schneider insisted that Europe could seek a cleaner route to energy security, by investing more heavily in renewable energy, for example. New US LNG export facilities wouldn't even help the situation for another three years, she said, adding that  Europe could "use this crisis to transition to more sustainable fuels."

Edited by: Uwe Hessler