What’s Behind the US-EU Strategic LNG Alliance?

With the intensification of geopolitical turbulence around the world, the strategic partnership between the United States and Europe in the domain of liquefied natural gas (LNG) and natural gas supplies seems to have become a stabilizing factor contributing to the European Union’s energy security. This growing relationship is not only an economic arrangement, but also a critical component of the EU’s strategy to diversify energy sources, and reduce dependence on those producers it sees as unreliable suppliers.

Since the early 2000s, the European energy landscape has largely been dominated by Russian oil and natural gas, with imports accounting for 28% and 44%, respectively. The growing dependence of major European countries – particularly Germany and its leading industrial sector – on a single supplier like Russia has exposed the continent to increasing political and economic vulnerabilities. After Moscow was put under severe economic sanctions over its actions in Ukraine, several European nations were prompted to halt most imports of natural gas from the Russian Federation. Over the past two years, some of them have even reactivated the development of previously dormant regasification projects around the continent.

But in 2022, after Russia launched the full-scale invasion of Ukraine, largely unprepared Europe faced several challenges in the initial stages of this transformation. LNG terminals lacked capacity, transportation routes and LNG ports were underdeveloped. More importantly, Europe lacked financing for major energy projects. However, the United States quickly made a strategic decision to reposition itself in Europe’s energy mix.

Washington sent more LNG to Europe during the first six months of 2022 than it did in all 12 months of 2021. Ever since, the US has been significantly increasing its LNG and natural gas supplies to Europe, compensating for the shortages. In 2023, the American LNG imports accounted for 46% of all European gas imports, overtaking Australia and Qatar as the world’s top supplier. The current situation is undoubtedly beneficial for other LNG producers as well, although their ability to act as the perfect substitute for the EU’s lost Russian gas supplies still remains highly limited.

The United States was, in many ways, a pioneer in the development of LNG, having patented numerous inventions that allowed the storing of liquid gases at very low temperatures. After the US became one of the largest exporters of LNG, and with the development of internal capacities and business practices such as selling LNG directly from ports and reducing penalties for cancelled shipments, many European nations started to turn to Washington for liquefied natural gas.

That is why European energy companies’ top officials are scheduled to meet with their American and other international counterparts at the World LNG Summit in Berlin, on December 9-12, to discuss, among other topics, further LNG supplies from the US to Europe. The event is also expected to serve as a catalyst for the transformation of the natural gas and LNG sector, and also to increase the US role of one of the world’s biggest suppliers of liquefied natural gas. 

But strategic importance of the American LNG seems to extend beyond mere supply. The US-EU liquefied natural gas partnership is likely underpinned by mutual strategic interests, which are crucial in establishing long-term energy stability in Europe. However, given the relatively underdeveloped European liquefied natural gas market, “the old continent” first needed to re-strategize and attract investors. Also, by diversifying its energy imports, Europe almost certainly aimed to cultivate a more resilient and dynamic market, and at the same time to end its dependence on Russian energy.  

The ongoing US-EU energy alignment is particularly evident in the collaborative efforts to transition towards cleaner energy sources and reduce carbon emissions – areas where the American LNG can play a significant role due to its lower carbon footprint compared to coal and other fossil fuels. Moreover, as a result of the expansion of the trans-Atlantic energy partnership, European countries want see more LNG coming to the continent at an affordable price.

Recent years have seen the US be the top supplier of LNG to Europe, accounting for 28% of imports in 2021, 43% in 2022 and 46% in 2023. However, at the end of January 2024, the outgoing US President Joe Biden announced Washington was pausing export permits for LNG. Despite fears, his decision did not have a serious impact on EU’s energy security. 

But the fact that in May 2024 Europe’s gas imports from Russia overtook supplies from the US for the first time in almost two years, clearly suggests that the geopolitical struggle for energy supply to Europe is far from over.

[Photo by Wikimedia Commons]

The views and opinions expressed in this article are those of the author.