A top U.S. Department of Energy official said the Trump administration has made progress in its effort to spur European imports of U.S. liquefied natural gas.
Under Secretary of Energy Mark Menezes cited recent developments: Cheniere Energy Inc. landed a deal to supply LNG to Poland, and Germany has discussed the prospect of a new receiving terminal. But he said the case for U.S. LNG is not driven by economics alone.
"True energy security requires energy diversity: a diversity of supply, diversity of countries providing that supply, and a diversity of routes delivering that supply," Menezes said Nov. 13 at the Atlantic Council in Washington. "Yet this is where many of our European partners are facing significant challenges."
The Trump administration has pushed Europe to import more U.S. LNG amid trade tensions between the U.S. and Europe and concerns over Europe's dependence on Russian supply. Menezes pointed to indications from the German government that it would financially back an LNG terminal as a positive step, even though experts have said such a project might not lead to U.S. LNG imports.
Little U.S. LNG reaches Europe. Regasification plants with a total import capacity of 20 Bcf/d are underused as expansions of these facilities have far exceeded demand for LNG imports. The European Union received 37% of its gas imports from Russia in 2017, according to figures from the European Commission.
"They are underutilized — that can be the end of the discussion," Menezes said. "But do we accomplish any of the goals that we've been talking about?"
"We want to make sure that there is infrastructure in place to allow for the import of U.S. LNG," Menezes said. "If the consequence of that is to have a facility which will bring the price down for our European partners and allies, then indeed increase supply at an affordable price. It's a win for everybody."
In the last few years, the increasing probability of American LNG landing in Europe prompted Russia to offer lower gas prices and revise contracts with terms more favorable to buyers. In Lithuania, for example, Russia offered lower prices for pipeline gas before the first LNG cargo arrived, said Christopher Smith, Cheniere's senior vice president of policy, government and public affairs. Smith, who was assistant secretary for fossil energy at DOE under the Obama administration, was part of the discussion with Menezes.
Cheniere wants to provide more to European customers than just leverage in its negotiations with Russia, Smith said. "We actually want to send the gas," he said.
That makes long-term sales and purchase agreements important, Smith said. Cheniere recently reached a 24-year LNG supply deal with Polish Oil and Gas Co. The deal calls for the state-run oil and gas company to buy shipments at volumes rising to about 1.45 million tonnes per annum, as Poland seeks alternatives to Russian gas supply. Smith said such investments are votes of confidence in the U.S. and the transparent pricing of the Henry Hub.
Of Cheniere's 17 long-term, foundation customers, 11 are based in Europe, Smith said. But many sell into Asia because of higher prices there.
"It's not a secret that it's a challenge to compete against a pipeline," Smith said. "The Russians have calculators."