EU countries seek to reduce their dependence on Russian gas supplies.
The United States will supply 15 billion cubic meters of liquefied natural gas (LNG) to European Union countries this year to help the EU phase out Russian gas supplies, transatlantic partners said on Friday.
The EU intends to reduce its dependence on Russian gas by two-thirds this year and completely stop importing Russian gas by 2027 due to Russia’s invasion of Ukraine. Now Russia provides about 40% of Europe’s gas needs.
Concerns about the reliability of supplies intensified this week after Russia ordered the transfer of payments under gas contracts to settlements in rubles, which increased the risk of supply cuts and even price increases.
American LNG plants are operating at full capacity, and analysts say that most of the additional gas from the United States sent to Europe will be provided by reducing exports to other countries. As a result, already high European gas prices may rise even more due to high demand against the background of limited supplies.
The terms of LNG supply contracts are not so easy to change in order to redirect gas to other buyers.
“It usually takes two to three years to build a new production facility, so this deal may be more about redirecting existing supplies than putting new capacity into operation,” Alex Frawley, a gas and LNG analyst at ICIS, told Reuters in an interview.
Senior representatives of the U.S. administration did not specify what volume or percentage of additional LNG supplies will flow to Europe from the United States.
Even if the figure indicated by the partners – 15 billion cubic meters – is achievable, “this is still not enough to replace the import of Russian gas, the volume of which in 2021 amounted to about 155 billion cubic meters,” analysts at ING Bank note.
President Joe Biden and European Commission President Ursula von der Leyen also announced a plan to create a working group to reduce Europe’s dependence on Russian energy resources.
The Commission will also work with EU countries to ensure that they will be able to receive an additional 50 billion cubic meters of LNG at least until 2030, the White House said in a statement.
The EU has already stepped up efforts to obtain more LNG after negotiations with supplier countries, resulting in a record 10 billion cubic meters of LNG delivered to European ports on more than 120 ships in January.
Meanwhile, Germany, the largest importer of Russian gas to the EU, said it had made “significant progress” in reducing its dependence on imports of Russian gas, oil and coal.
However, German Economy Minister Robert Habeck also said that Europe’s largest economy will be able to abandon Russian gas only by 2024.
German utilities on Thursday said that their country needs an early warning system about a possible gas shortage, as Putin’s demand to pay for gas in rubles made European companies and EU countries puzzled about the possible consequences of this step.
Some countries, such as Italy, have said they will continue to pay for Russian gas in euros. The CEO of the Polish PGNiG said that the company, which has a contract with Gazprom until the end of this year, cannot simply switch to payment in rubles.
Russia’s demands to pay for gas in rubles still need to be reinforced by a specific mechanism.
A representative of the German company Uniper said on Friday: “We have not received any official notifications or requests for processing settlements in rubles.”
The German economy minister said that the government will consult with its partners about Putin’s demand to pay for gas supplies in rubles.