The UK and US have pledged to maintain high levels of liquefied natural gas trade between the two countries as part of a new ‘energy partnership’ which aims to reduce dependence on electricity. Russia and accelerate the push to net zero.
Rishi Sunak, the British Prime Minister, and Joe Biden, the US President, announced the initiative on Wednesday, which aimed to double the amount of LNG the US sends to the UK from 2021 levels – a target which has already been achieved this year. as European countries raced to find alternatives to Russian gas supplies following the invasion of Ukraine.
Neither the US nor the UK has a state-backed energy company, so flows are primarily determined by market forces, but the two countries have said they will work together to ensure ” market conditions for long-term security of supply”.
The two governments have said they will create a joint action group, made up of senior officials from both sides, to oversee the initiative.
The UK, like the rest of Europe, has been hit by the price spike, but is less dependent on Russian gas than the EU and its LNG terminals have been used to send additional gas to Europe continental this year.
In a joint statement, Sunak and Biden said the two countries would also recognize “the role of natural gas in providing near-term energy security” and “the importance of Britain’s LNG import infrastructure and interconnection for wider European security of supply”.
They also sought to underscore their commitment to “the importance of energy efficiency in enhancing energy security and affordability” while highlighting “the longer-term goal of supporting a stable energy transition to achieve net zero emissions. by 2050”.
Sunak said, “We have the natural resources, industry and innovative thinking we need to create a better, freer system and accelerate the transition to clean energy.”
The initiative comes nine months after Biden and European Commission President Ursula von der Leyen announced a plan for the United States to ship more LNG to the EU this year.
LNG production capacity in the United States has increased to nearly 100 million tons per year following the start-up of the country’s seventh major plant.
Just over two-thirds of the 71 million tonnes of LNG exported from the United States this year went to Europe, according to shipment tracker Kpler, as utilities outbid Asian buyers for spare cargoes as they rush to make up for reduced supplies from Russia.
The UK took 8 million tonnes, or nearly 11 billion cubic meters, double the volume imported from the US in 2021, Kpler said. The United States and the United Kingdom have said they will “strive” to see that level rise to 9-10 billion cubic meters next year.
US production is expected to increase further in 2023 when the Freeport LNG plant in Texas, out of service since the summer following a fire, resumes exports.
But most of the LNG produced at US plants has been bought by utilities – including state-controlled energy companies in Asia – and traders such as Shell or Vitol, which resell cargoes based on the movements of price on the world market.
US authorities have no control over the commercial terms of exports or their destination. Spot cargoes, or those sold outside of multi-year supply agreements, account for 10 and 20 percent of total US exports and have been the target of fierce competition among buyers over the past year.
