Baby, I Got It - Could the U.S. Alone Meet Biden’s Call for 15 Bcm More LNG to the EU?

The Biden administration said last Friday it would help ensure deliveries of an additional 15 billion cubic meters (Bcm) of LNG to the European Union (EU) market in 2022. A frenzy of media articles followed and the targeted increase was widely cited. The April CME/NYMEX Henry Hub futures contract rallied nearly 3% to $5.55/MMBtu on Friday, and the stock price for Cheniere Energy, the largest LNG producer in the U.S., jumped 5.5% the same day. But U.S. liquefaction facilities have already been running full tilt and sending record volumes to Europe. So, what does the news really mean for U.S. LNG exports and the domestic gas market? In today’s RBN blog, we put that 15 Bcm in perspective and distill the key takeaways for U.S. LNG production.

We’ll start with the announcement itself, which in our view marked a major shift in the administration’s stance on natural gas and LNG infrastructure development. The White House last Friday made a joint statement with the European Commission (EC) — which represents the 27 countries in the EU — in which they committed to working with its international partners to reduce Europe’s dependence on Russian energy supplies. Together, the EU and U.S. established the joint Task Force on Energy Security to put in place the parameters of the relationship and ultimately execute on their stated goals. The statement laid out various areas of focus with the aim of achieving Europe’s energy security and independence from Russian gas by 2027, including:

1. reducing the greenhouse gas intensity of new LNG and gas pipeline infrastructure;
2. improving the regulatory environment to review and expedite LNG export projects on the U.S. side and LNG import, pipeline and storage projects on the EU side; and
3. making progress toward the other goals and targets laid out in the EC/EU’s proposed REPowerEU plan announced March 8 (including displacing 155 Bcm of piped Russian gas).

Among the most immediate targets in last week’s announcement — and one that would affect the U.S. directly — was the commitment to increase LNG deliveries to the EU market by at least 15 Bcm in 2022, with further increases expected down the road. Importantly, the statement specified that the goal applies to deliveries to the EU market, not all of Europe — a key distinction, given that the U.S. exports a significant volume to non-EU countries in Europe as well, particularly the UK and Turkey (we’ll explain more in a bit). Additionally, based on what we gleaned from the statement and the related press briefing, the increase in volumes to the EU would be accomplished by rerouting cargoes from other destinations — namely Asia. And, finally, presumedly the increase in volumes would be from the baseline of the 2021 average and not the 2022 average export volume, which is much higher. (The senior administration official conducting the press briefing acknowledged as much.)