Shifting Geopolitical Role of U.S. LNG
When Russia’s war on Ukraine in 2022 created a scramble for alternative gas supplies, U.S. LNG featured heavily in the transatlantic response. The United States and the European Union formed the U.S.-EU Task Force on Energy Security to help reduce EU reliance on Russian energy, diversify EU gas supplies, and accelerate the transition away from imported fossil fuels in Europe. The Biden administration pledged in March 2022 to ensure at least 15 billion cubic meters (bcm) of U.S. LNG supply to Europe that year, and the European Commission agreed to work with member states to ensure “stable demand for additional U.S. LNG until at least 2030 of approximately 50 bcm/annum.” The market delivered. LNG exports to Europe far exceeded targets for 2022 and 2023, reaching 56 bcm and 63 bcm, respectively. Today, about 50 percent of Europe’s LNG imports come from the United States.
U.S. LNG as well as Norwegian pipeline gas helped Europe withstand the economic shock of Russia’s weaponization of gas supplies and kept solidarity behind Ukraine. Mild weather and prudent stockpiling have calmed immediate concerns in Europe about lost supplies. Russian imports still constitute 20 percent of Europe’s gas supply, but Ukraine’s last remaining contract for transit volumes from Russia is due to end in 2024 and governments across Europe have no intention to resume larger gas imports from Russia. However, as European buyers seek a full divorce from Russian gas, the pause on new LNG project approvals will raise some longer-term concerns. Scarcer supplies from the United States after 2030 could make this more challenging.
The Biden administration has argued that Europe, which is trying to reduce gas imports by investing heavily in renewables and electrification, has been able to secure sufficient supplies through short-term buying, and that additional LNG export capacity after 2030 would be of limited geopolitical value. But other regions are more central to the long-term outlook. Asia rather than Europe will account for most post-2030 LNG demand growth, and U.S. allies and trade partners in Asia are concerned about signs of long-term supply constraints from the United States. Current and under-construction LNG projects should meet most of the demand in this decade, but as Asian demand grows, more projects could be necessary to offset declines from existing suppliers.
