In the current global energy price environment, it is difficult to see the ocean for the waves.
But, the likely confluence of events this month—release of the European Commission’s liquefied natural gas (LNG) strategy on Feb. 16 and the first exports of LNG from the continental United States since the early 1960s—provide an opportune time to look beyond current market conditions and focus on the long-term promise of U.S.-EU LNG trade.
Even as Europe embraces a future that prioritizes renewable resources, energy efficiency, and technology development, it is certain that natural gas will remain an essential part of the EU energy mix for many decades. Because indigenous production is waning and reliance upon a single external supplier (as several Central and Eastern member states do) is problematic, LNG imports are projected to grow in future years.
Of course, this cannot and will not happen overnight. Both LNG export and import facilities must be completed, interconnecting pipelines built, and new commercial relationships forged. Everyone along the LNG value chain (and outside observers) must remember that this has always been a long-term business with a multi-decade, not multi-quarter, time horizon.
Despite the development work that must be done on both sides of the Atlantic, make no mistake: a very large volume of U.S. LNG is most certainly destined for Europe.
America’s oil and gas renaissance may have slowed over the last eighteen months, but it is not moribund. Our easily accessed and extremely cost-competitive natural gas reserves are enormous, and, for that reason, we will remain among the lowest cost providers. Factor in the proximity of our export facilities to Europe and it should be clear that U.S. LNG shipments to the EU will be limited only by the demand on your side of the pond. The United States is not—in economic jargon—the least bit “supply constrained.”
The U.S. energy “model,” as American Petroleum President Jack N. Gerard is fond of saying, has brought about significant CO2 reductions along with robust economic growth. We firmly believe that over the coming decades, U.S. LNG can—and will—bring similar benefits to America’s European allies.
As the first cargo of U.S. LNG leaves Cheniere Energy’s Sabine Pass export facility and the European Commission’s LNG Strategy is adopted, remember: this is just the beginning of the beginning when it comes to U.S.-EU LNG trade and cooperation. The best is yet to come.
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This Guest Editorial first appeared in the Feb. 2016 edition of the European Commission’s Energy in Europe newsletter (distributed monthly by DG-Energy). This slightly edited version is reprinted with permission.