New legislation seeks to promote the expansion of US LNG exports to Europe at the expense of Russian pipeline gas to the region.
A bill introduced Wednesday by US Senator John Barrasso, a Wyoming Republican, would impose mandatory sanctions on Russia’s Nord Stream II gas pipeline and expedite the export of US natural gas to NATO allies.
Demand for gas in European Union countries has increased as the bloc aggressively pursues clean air policies, which means less use of coal for power production. Russia has been a major source of gas supply to the region for decades, though in recent years some countries have expressed a desire for alternatives.
“With an abundance of natural gas in the United States, it’s time we use American energy resources to give our allies lasting and dependable energy security,” Barrasso said in a statement.
Gazprom’s Nord Stream II gas pipeline would run across the Baltic Sea to connect Russia and Germany. Some countries in the region, including Ukraine, are lobbying hard against the project because it would allow an additional 5.3 Bcf/d of gas flows to bypass them, and they currently rely on lucrative transit fees to move Russian gas across their borders.
Also, import prices would likely go up for these countries, as the marginal source of gas would have to come from Western European spot markets at higher prices given the greater Russian flexibility to go around them, S&P Global Platts Analytics data shows.
Recently, during his trip through Europe, President Donald Trump criticized Nord Stream II and Germany’s involvement.
Because of market realities, how much US pressure, through legislation, could benefit US LNG exports to Europe and hurt Russian interests remains unclear. How the sanctions element of Barrasso’s bill would be implemented also was unclear, since the US isn’t involved in the Nord Stream II project.
Energy officials from Poland and Lithuania said at a conference in Houston in March that their countries are interested in more US supplies, though they also acknowledged Russia’s grip on the market in the region.
Considerations such as price and cost of delivery are key drivers of decisions by buyers and sellers. And because the LNG market is becoming much more flexible and dynamic, the long-term outcome is likely to be commercially, rather than politically, driven.