Ship part

Explanation: Could the United States ship more LNG to Europe?

Transfer lines covered in snow are seen at the Dominion Cove Point liquefied natural gas (LNG) terminal in Lusby, Maryland March 18, 2014. REUTERS/Gary Cameron

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March 25 (Reuters) – The United States, the world’s largest natural gas producer, wants to send more liquefied natural gas (LNG) to Europe to help allies break their dependence on Russian gas after the invasion of Ukraine via Moscow on 24 February.

On Thursday, US President Joe Biden pledged the US would deliver at least 15 billion cubic meters (bcm) more of LNG to Europe this year than previously expected, people familiar with the matter said. Read more

This amount – 15 billion cubic meters (bcm) – converts to about 1.5 billion cubic feet per day (bcfd). For context, 1 billion cubic feet is enough to heat 5 million American homes for a day.

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HOW MUCH LNG DOES THE UNITED STATES EXPORT?

The United States, which produces 96.7 bcfd of gas, has the capacity to supercool about 12.7 bcfd in liquid for tanker transport.

However, the seven US LNG export plants are currently operating at full capacity and liquefying about 12.7 billion cubic feet per day of gas. So no matter how high world prices go, the US can no longer produce LNG – yet.

About 24%, or about 2.4 billion cubic feet per day, of U.S. LNG exports went to Europe in 2021, according to data from Rystad Energy.

The United States has already provided an additional 0.8 bcfd from January to February, compared to the same period a year ago.

“The United States can easily exceed this target of 15 billion cubic meters (1.5 billion cubic feet per day), as European price signals … are likely to far exceed Asian spot prices,” said Sindre Knutsson, vice president of Rystad Energy, in a note.

Processing capacity in the United States was on track to reach approximately 13.1 billion cubic feet per day by the end of 2022, as more liquefaction trains from the Calcasieu Pass export plant in Venture Global LNG in Louisiana come into service.

WHAT DOES EUROPE IMPORT FROM RUSSIA?

Russia produced about 67.9 billion cubic feet per day of gas in 2021 and exported 24.4 billion cubic feet per day, of which almost 75% (18.3 billion cubic feet per day) went to countries from the Organization for Economic Co-operation and Development (OECD). The OECD is a club made up mostly of rich countries.

SO, CAN THE UNITED STATES BUY MORE GAS FROM EUROPE?

Yes, but it wouldn’t match what Russia sends to Europe, and it will largely involve re-routing existing shipments.

“We expect short-term measures to support European LNG imports to rely on reallocating existing supply,” Goldman Sachs analysts said.

A senior US administration official said the effort will involve agreements with allies around the world, producers and consumers, to route shipments to Europe.

Goldman Sachs said “such a relocation to Europe is already happening” as gas prices in Europe have been among the highest in the world for the past few months.

Analysts said governments can find ways to encourage tankers to keep going to Europe. In the short term, governments could provide subsidies to allow European utilities to pay more for LNG cargoes or governments could provide the extra money directly to shippers to encourage them to deliver more cargoes to Europe.

However, European LNG terminals have limited available capacity to absorb additional supply from the United States or other major producers in the event of gas disruption from Russia. Read more

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Reporting by Scott DiSavino and Marwa Rashad; Editing by Marguerita Choy

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