Talks to send more U.S. natural gas to Europe have stalled as the continent’s climate targets deter buyers from making long-term fossil fuel supply commitments, according to two U.S. energy executives.
The United States has shipped record volumes of liquefied natural gas to Europe over the past year, helping the continent stave off an energy catastrophe after Moscow cut off most of its pipeline supplies as part of the war in Ukraine.
But U.S. gas executives say buyers have generally been unwilling to commit to new, multi-decade supply deals needed to support a new wave of project construction in the Gulf of Mexico that would further increase l offer in the years to come.
“[European] buyers are afraid their governments will tell them they can’t buy hydrocarbons in 15 or 20 years,” said Nick Dell’Osso, chief executive of Chesapeake Energy, one of the largest gas producers in the states. -United.
“[Things] are a bit at loggerheads right now,” he said.
Paul Varello, managing director of Commonwealth LNG, which is trying to find buyers for its planned export plant in Louisiana on the US Gulf Coast, said it was also struggling to find willing European buyers.
“Is it popular in Europe to come to Commonwealth LNG and do a 20-year contract . . . the answer is no,” he said. carbon neutrality by 2050.”
The long-term contracts, which can be worth billions of dollars over decades, were needed to secure financing from banks to cover the “monstrous cost” of building new LNG plants, Varello said.
Europeans are still focused on meeting their energy needs over the next two years, creating a “mismatch” between them and U.S. LNG producers who need much longer commitments, said Jason Gabelman, an analyst at Cowen. Research.
Last year, the European Commission and the White House agreed to a deal under which the United States would try to send more LNG to Europe, but only until 2030. The EU aims to be free of net emissions by 2050 and wants to replace Russian gas with huge construction. of clean energy capacity in the years to come.
European buyers have signed deals with US developers over the past year. Poland’s PKN Orlen last month signed a 20-year supply deal with a Texas export plant offered by Sempra LNG and in October Germany’s EnBW extended an existing deal with exporter Venture Global.
But those deals have not been delivered at the pace and scale that many predicted last year as Europe grappled with a brutal energy supply crisis. Nearly a year after Russia invaded Ukraine, only one of more than a dozen potential U.S. LNG export projects has secured enough buyers to commit to building its facility.
The mild winter in Europe, which caused a sharp drop in natural gas prices and kept storage levels at healthy levels, further dampened buyers’ appetite for long-term commitments that many consider expensive and risky. , given the energy transition, according to industry executives and bankers.
U.S. gas developers are instead eyeing potential buyers in China, South Korea, India and elsewhere in Asia, where appetite for fossil fuels is expected to grow further.
“While the green influence in Europe impacts their whole ethos, that’s not the case in Asia,” Varello said. “They are satisfied with the energy security and they want a good price.”
But a particularly harsh winter in the coming years could change Europe’s position on natural gas, Varello added.
“I heard someone say ‘give them a winter to freeze their ass in the dark, and they’ll think better of natural gas’ and I think they will.”