A Baltic Sea Perspective on U.S. LNG in Europe
Liquefied natural gas (LNG) is one of the fastest-growing industries in the world and the United States is the fastest-growing exporter in the field. The U.S. Energy Information Administration notes that the country will most likely almost double its LNG export capacity from 5 billion cubic feet (bcf) per day to nearly 9 bcf per day by the end of this year. This would make the United States the third-largest LNG exporter in the world behind Australia and Qatar. According to the European Commission, LNG imports from the United States grew by 181 percent between July 2018 and March 2019, making the country Europe’s third-largest supplier.
The growing global LNG market does not only have commercial importance, but it has also become a tool of great-power politics in the energy-security sphere. This is especially seen in tensions between the West and Russia. This was discussed in the German Marshall Fund’s session on global LNG markets at the 11th European Economic Congress in Katowice, Poland, on May 14.
“The EU’s main concern when it comes to energy security is gas supply,” noted Dominique Ristori, the director-general for energy in the European Commission, on this occasion. Currently, Russia has the biggest share of Europe’s LNG imports. Taking into account the political aspect of the energy markets, this dominance poses a threat to Europe’s energy security. Nevertheless, this situation will change somewhat in the near future.
First, as was repeatedly stressed in the discussion in Katowice, Europe’s demand and the United States capabilities are a perfect match. Last year European Commission President Jean-Claude Juncker and President Donald Trump agreed to strengthen the EU-U.S. strategic cooperation in LNG markets. The EU is willing to double its imports from the United States from 2018’s level of 4 (bcn) to 8 bcn by 2022. This would decrease Russia’s dominance of Europe’s LNG market, even though its role would remain still substantial.
Second, the EU’s Energy Security Strategy—launched in 2014 by the European Commission—aims to diversify energy supplies to ensure a secure and abundant supply for all member states. At the moment many of them, and especially Poland and the Baltic states, are heavily reliant on Russia for their natural gas—or some even entirely. This leaves them vulnerable to supply disruptions, whether caused by political or commercial disputes. For example, many EU countries faced severe shortages because of the disputes between Russia and transit country Ukraine in 2009.
Last but not least, the ongoing debate over the North Stream 2 pipeline, running from Russia to Germany on the bottom of the Baltic Sea, has been a big factor in European countries, especially in the Baltic Sea region, seeking to diversify their gas supply. The pipeline, due to be inaugurated in 2020, will run alongside the already built North Stream and will double the amount of Russian gas being funneled through the Baltic to 110 billion cubic meters per year. However, Sweden, Finland, Denmark, and the Central European countries have called on Germany to abandon the project, as they perceived Nord Stream 2 as a Russian Trojan horse that could greatly affect the security of the region and allow Moscow to increase its control over Europe’s energy supply. They also highlight the fact that it could greatly affect Ukraine by reducing the amount of gas that transits through the country.
States like Poland have asked the United States to intervene in this matter. The U.S. ambassador to the country, Georgette Mosbacher, in her opening speech at the GMF session in Katowice said that “North Stream 2 is not only an economic but also a political project.” The strong U.S. opposition to the project was reiterated by Energy Secretary Rick Perry during his speech in Kyiv when he attended the inauguration of Ukraine’s new president, Volodymyr Zelenskiy. Perry stated that he expected Congress to pass a measure that would impose sanctions on North Stream 2 and that President Donald Trump would approve it. A week earlier a bipartisan group of U.S. senators had announced a bill that would impose sanctions on vessels used to construct deep sea pipelines for Russian energy export projects that include North Stream 2. If the sanctions are imposed the project might be put on hold, as Russia does not have the technology that would allow it to construct the pipeline on the open sea.
North Stream 2 can be a motivation for European states to invest more in diversified energy supplies. Poland and the Baltic states are building LNG terminals at an unprecedented pace in their eagerness to break their dependence on eastern supplies. Nowadays, Europe is well prepared and has the capacity to welcome more gas from the United States. On many occasions, officials have highlighted the fact that the EU’s main concern when it comes to energy security is gas supply. With the growth in the LNG industry in the United States and the EU’s constantly increasing energy needs, the future is promising. As Dominique Ristori pointed out at the GMF session in Katowice, “Europe has to not only diversify but also import more gas.” This could stop being a problematic issue in Europe in the foreseeable future as a result of greater LNG supply from the United States. LNG could move transatlantic relations to a different level, making it a much-needed success story.