Clifford Krauss, NYtimes

HOUSTON
EnergiesNet.com 03 25 2022

President Biden announced Friday that the United States would send more natural gas to Europe to help it break its dependence on Russian energy. But that plan will largely be symbolic, at least in the short run, because the United States doesn’t have enough capacity to export more gas and Europe doesn’t have the capacity to import significantly more.

In recent months, American exporters, with President Biden’s encouragement, have already maximized the output of terminals that turn natural gas into a liquid easily shipped on large tankers. And they have diverted shipments originally bound for Asia to Europe.

But energy experts said that building enough terminals on both sides of the Atlantic to significantly expand U.S. exports of liquefied natural gas, or L.N.G., to Europe could take two to five years. That reality is likely to limit the scope of the natural gas supply announcement that Mr. Biden and the European Commission president, Ursula von der Leyen, announced on Friday.

“In the near term there are really no good options, other than begging an Asian buyer or two to give up their L.N.G. tanker for Europe,” said Robert McNally, who was an energy adviser to former President George W. Bush. But he added that once sufficient gas terminals were built, the United States could become the “arsenal for energy” that helps Europe break its dependence on Russia

For now, however, climate concerns appear to be taking a back seat as U.S. and European leaders seek to punish President Vladimir V. Putin of Russia for invading Ukraine by depriving him of billions of dollars in energy sales.

The United States has already increased energy exports to Europe substantially. So far this year, nearly three-quarters of U.S. L.N.G. has gone to Europe, up from 34 percent for all of 2021. As prices for natural gas have soared in Europe, American companies have done everything they can to send more gas there. The Biden administration has helped by getting buyers in Asian countries like Japan and South Korea to forgo L.N.G. shipments so they could be sent to Europe.

The United States has plenty of natural gas, much of it in shale fields from Pennsylvania to the Southwest. Gas bubbles out of the ground with oil from the Permian Basin, which straddles Texas and New Mexico, and producers there are gradually increasing their output of both oil and gas after greatly reducing production in the first year of the pandemic, when energy prices collapsed.

But the big problem with sending Europe more energy is that natural gas, unlike crude oil, cannot easily be put on oceangoing ships. The gas has to first be chilled in an expensive process at export terminals, mostly on the Gulf Coast. The liquid gas is then poured into specialized tankers. When the ships arrive at their destination, the process is run in reverse to convert L.N.G. back into gas.

A large export or import terminal can cost more than $1 billion, and planning, obtaining permits and completing construction can take years. There are seven export terminals in the United States and 28 large-scale import terminals in Europe, which also gets L.N.G. from suppliers like Qatar and Egypt.

Some European countries, including Germany, have until recently been uninterested in building L.N.G. terminals because it was far cheaper to import gas by pipeline from Russia. Germany is now reviving plans to build its first L.N.G. import terminal on its northern coast.

“Europe’s need for gas far exceeds what the system can supply,” said Nikos Tsafos, an energy analyst at the Center for Strategic and International Studies in Washington. “Diplomacy can only do so much.”

In the longer term, however, energy experts say the United States could do a lot to help Europe. Along with the European Union, Washington could provide loan guarantees for U.S. export and European import terminals to reduce costs and accelerate construction. Governments could require international lending institutions like the World Bank and the European Investment Bank to make natural gas terminals, pipelines and processing facilities a priority. And they could ease regulations that gas producers, pipeline builders and terminal developers argue have made it more difficult or expensive to build gas infrastructure.

Charif Souki, executive chairman of Tellurian, a U.S. gas producer that is planning to build an export terminal in Louisiana, said he hoped the Biden administration would streamline permitting and environmental reviews “to make sure things happen quickly without micromanaging everything.” He added that the government could encourage banks and investors, some of whom have recently avoided oil and gas projects in an effort to burnish their climate credentials, to lend to projects like his.

“If all the major banks in the U.S. and major institutions like BlackRock and Blackstone feel comfortable investing in hydrocarbons, and they are not going to be criticized, we will develop $100 billion worth of infrastructure we need,” Mr. Souki said.

“That’s the bottleneck,” Mr. Tsafos said.

Roughly 10 European import terminals are being built or are in the planning stages in Italy, Belgium, Poland, Germany, Cyprus and Greece, but most still don’t have their financing lined up.

The Russia-Ukraine War and the Global Economy

Rising concerns. Russia’s invasion on Ukraine has had a ripple effect across the globe, adding to the stock market’s woes and spooking investors. The conflict has already caused​​ dizzying spikes in energy prices, and could severely affect various countries and industries.

The cost of energy. Oil prices already were the highest since 2014, and they have continued to rise since the invasion.  Russia is the third-largest producer of oil, so more price increases are inevitable.

Gas supplies. Europe gets nearly 40 percent of its natural gas from Russia, and it is likely to be walloped with higher heating bills. Natural gas reserves are running low, and European leaders worry that Moscow could cut flows in response to the region’s support of Ukraine.

Food prices. Russia is the world’s largest supplier of wheat; together, it and Ukraine account for nearly a quarter of total global exports. Countries like Egypt, which relies heavily on Russian wheat imports, are already looking for alternative suppliers.

Shortages of essential metals. The price of palladium, used in automotive exhaust systems and mobile phones, has been soaring amid fears that Russia, the world’s largest exporter of the metal, could be cut off from global markets. The price of nickel, another key Russian export, has also been rising.

Financial turmoil. Global banks are bracing for the effects of sanctions intended to restrict Russia’s access to foreign capital and limit its ability to process payments in dollars, euros and other currencies crucial for trade. Banks are also on alert for retaliatory cyberattacks by Russia.

Russia provides about 40 percent of Europe’s gas, and its biggest customers tend to be in Eastern and Central Europe. Some countries have built up L.N.G. import capacity, but much of it is in Southern Europe, which is not well connected by pipeline to the countries in the north and the east.

A month into the war in Ukraine, Russian gas shipments to Europe have remained relatively stable, but that could change. Mr. Putin suggested on Wednesday that countries hostile to Russia should be required to pay for its energy in rubles rather than euros or dollars. That would force European companies to deal with Russian banks that have been sanctioned by Western governments.

There are some signs that European businesses and individuals might reduce their use of natural gas in part because it has become so expensive. For example, Yara International, a major fertilizer manufacturer in Italy and France, has said that it would reduce production because of high costs of raw materials like natural gas.

While reducing demand would help, some climate scientists and activists are worried that the Biden administration’s and European Union’s focus on building L.N.G. terminals could deal a grievous blow to the effort to address global warming by encouraging the use of fossil fuels.

“There is a risk of locking in 20 or even 30 years of emissions from export infrastructure at a time when you really need to be reducing your overall emissions,” said Clark Williams-Derry, a senior fellow at the Institute for Energy Economics and Financial Analysis, a research organization.

Jason E. Bordoff, a cofounding dean of Columbia University’s Climate School and a former energy adviser to President Barack Obama, said that the Biden administration could encourage more shipments of gas to Europe while also promoting cleaner alternatives like wind and solar energy.

“In the longer term, U.S. government financing tools and diplomacy can help accelerate Europe’s transition to clean energy to reduce dependence on inevitably volatile hydrocarbons,” he said.

Some promoters of natural gas exports say that the fuel could help Europe achieve climate goals by displacing the use of coal at power plants. Burning coal releases more greenhouse gases than burning gas.

Gina McCarthy, Mr. Biden’s senior climate change adviser, said on Thursday that the administration intends to “balance” what she called a “short-term emergency fix” to help Europe with addressing climate change.

“We cannot increase our dependence on fossil fuels,” Ms. McCarthy told a group of renewable energy executives. “We are making clear distinctions even in our conversations with the European Union.”

Lisa Friedman contributed reporting from Washington.

Clifford Krauss is a national energy business correspondent based in Houston. He joined The Times in 1990 and has been the bureau chief in Buenos Aires and Toronto. He is the author of “Inside Central America: Its People, Politics, and History.”  @ckrausssA version of this article appears in print in The New York Times-NYT, on March 25, 2022, Section B, Page 1 of the New York edition with the headline: Russian Gas Could Prove Hard to Quit For Europe.