Since April 2016, when the first US LNG carrier arrived in the Portuguese port of Sines, EU imports of LNG from the US have increased from zero to 2.8 billion cubic meters. Now, the two countries agreed to further bolster their strategic cooperation with respect to energy, according to the joint statement of 25 July by President Juncker and President Trump.
Diversification is an important element for ensuring the security of gas supply in the EU. Increasing imports of competitively priced liquefied natural gas from the US is therefore to be welcomed. This is happening at a time when EU indigenous gas production is declining more rapidly than foreseen and there is an accelerated phase-out of coal power plants in the EU,
…explained Commissioner for Climate Action and Energy, Miguel Arias Cañete.
In this context, the EU would import more LNG from the US to diversify and render its energy supply more secure. The EU and the US will therefore work to facilitate trade in liquefied natural gas. European Commission President, Jean-Claude Juncker, said:
The European Union is ready to facilitate more imports of liquefied natural gas from the US and this is already the case as we speak. The growing exports of US liquefied natural gas, if priced competitively, could play an increasing and strategic role in EU gas supply; but the US needs to play its role in doing away with red tape restrictions on liquefied natural gas exports. Both sides have much to gain by working together in the energy field.
The EU has co-financed or committed to co-finance LNG infrastructure projects worth over €638 million. In addition to the existing 150 billion cubic meters of spare capacity in the EU, the EU is supporting 14 LNG infrastructure projects, which will increase capacity by another 15 billion cubic meters by 2021, which could welcome imports of liquefied natural gas from the US, if the market conditions are right and prices competitive.
Currently, US legislation still requires prior regulatory approval for LNG exports to Europe. These restrictions need to be addressed and US rules made easier for US LNG to be exported to the EU.
Presidents Juncker and Trump set up an Executive Working Group at their meeting in Washington, on 25 July. Since then, contacts have taken place between Presidents Juncker and Trump, between EU Trade Commissioner Malmström and US Trade Representative Lighthizer, and between the senior advisers of President Juncker and President Trump (Commission Secretary-General Martin Selmayr and White House Chief Economic Adviser Larry Kudlow).
It has been agreed that, on 20 August, the Trade Adviser of President Juncker and a senior EU trade official will travel to Washington, D.C. to meet their US counterparts to continue work on implementing the Joint Statement. In this context, the EU and the US are working within the framework of this Executive Working Group to increase US exports of LNG to Europe.
The global LNG market is becoming increasingly fluid and competitive. Between 2017 and 2023, global LNG trade is expected to grow by more than 100 billion cubic meters, from 391 to 505. US IEA expects LNG imports to Europe to increase by almost 20% by 2040 compared to 2016 levels.
In order to increase imports to Europe further, US prices for LNG need to be competitive on the EU market. The European Commission suggests the following actions to facilitating imports:
- Development of LNG capacities in EU and US
The EU has well developed LNG import capacities, with about 150 billion cubic meters currently spare. At the same time, given their strategic importance for diversification, current capacities are being expanded and new capacities are being developed in the Adriatic Sea (on the island of Krk in Croatia), in the Baltic Sea, notably in Poland, and in the Mediterranean Sea in Greece. This would allow for a significant increase of LNG imports to the EU.
- Regulatory restrictions by the US need to be lifted
The EU has no non-market barriers for US natural gas coming to the EU. The EU is seeking similar treatment from the US side, in particular as regards the removal of the requirement for prior approval of liquefied natural gas exports to the EU.
