Saturday

20th Jul 2019

Analysis

EU purchase of US gas serves dual purpose

  • Liquefied natural gas (LNG) can be transported by ship to anywhere with an LNG terminal - making a country less reliable on a single supplier (Photo: kees torn)

The European Union and the United States have found a mutual interest in the form of liquefied natural gas (LNG), which allows the two sides to cooperate on energy despite US president Donald Trump's aggressive stance towards the Paris climate treaty and currently tense EU-US trade relations.

"The United States has what Europe wants: an incredible abundance of clean and affordable gas," US secretary of energy Rick Perry said on Thursday (2 May).

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  • Perry: 'The United States has what Europe wants' (Photo: European Commission)

Perry spoke at the first-ever High-Level Business to Business Energy Forum, held in Brussels.

He said the event, which brings businesses from both sides of the Atlantic together, was an idea of US ambassador to the EU, Gordon Sondland.

"I hope before you leave out here today .. that there are the seeds planted for some deals to be done," Perry told the audience.

The LNG business summit takes place less than a year after European Commission president Jean-Claude Juncker and US president Donald Trump agreed the EU would import more LNG.

The commission published figures on Thursday - with obvious strategic timing the same day as Perry's visit - that said US LNG exports to the EU have increased by 272 percent since the Trump-Juncker meeting.

The LNG event comes amidst otherwise tense trade relations between the EU and US, with a US threat of tariffs on cars hovering over the EU's head.

It is because of that context that one EU source saw a comment by Perry as a thinly-veiled threat.

Asked at a short press conference why Europe should buy American LNG, which is more expensive than Russian gas by pipeline, Perry compared buying Russian gas to buying a cheap car.

"You get what you pay for," said Perry.

"If just the cheapness of the supply is all you care about, then you might not buy a BMW, or a Mercedes-Benz, or one of the fine automobiles that come out of the European Union," said Perry.

"You might buy cheaper from some place else - but it might not be reliable. The point is the same with Russian gas," he said, adding that "our friends from Ukraine" could give some insight into the reliability of Russian gas.

BMW and Mercedes-Benz are relatively expensive, German car brands, US purchases of which Trump has previously riled against, because of his aversion to trade deficits.

The business forum took place as part of the so-called EU-US Energy Council framework, which was set up under the presidency of Trump's predecessor, Barack Obama.

Following the handover in the White House in 2016, it was unclear for a while whether the transatlantic energy cooperation would continue, in particular because of Trump's opposition to climate change action.

But the two sides held a ministerial summit in the summer of 2018, revitalising the framework.

However, a working group on climate change has remained dormant.

An EU source said that there would be no point in having a meeting of the working group, because the US was not interested in working on climate change.

LNG is still fossil fuel

On natural gas however, the interests of the EU and US seem to align.

Despite natural gas being a fossil fuel, the EU commission expects that it will remain a part of the bloc's energy mix until at least 2030.

The natural gas sector has successfully managed to frame its product as relatively clean - when compared to plants powered by coal.

"Gas remains important in the energy supply for some time to come," EU climate action commissioner Miguel Arias Canete said Thursday.

He said that the EU expected natural gas, and thus LNG, "will continue to have an important role in the years to come".

European domestic production of natural gas is going down, International Energy Agency executive director Fatih Birol said Thursday.

"Europe … will need more and more natural gas imports, even in a context of flat, almost flat, natural gas demand," he said.

In the longer term, if it wants to fully decarbonise its economy, the EU will have to phase out natural gas.

But in the shorter term, as long as it does use gas, the EU wants to diversify where it gets it, to become less dependent on Russia.

The LNG import boost can not only reduce dependency on Russia, but at the same time make a small step towards making Trump happy - in the hope of heading off those tariffs on cars, a major EU export product.

The US' economic interests in LNG sales also align with its geopolitical opposition to the Nord Stream 2 project.

This planned pipeline would transport Russian gas to Germany, in direct competition with US liquefied gas.

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