Europe and China have increased LNG imports from the US and are actively investing in its production

The conduct of a special military operation (SVO) of Russia in Ukraine has led to a sharp increase in demand for American gas from European and Chinese companies. At the same time, not only the volume of imports of liquefied natural gas from the United States increased, but also the investments of Europe and China in the American gas infrastructure.

European and Chinese energy companies are actively vying for US natural gas supplies. As writes Financial Times (FT), in recent years, and especially since the launch of Russia’s special military operation in Ukraine, the number and volume of transactions between companies from Europe and China and American gas field operators have grown significantly.

According to the FT, in 2021, the total volume of contracts for the supply of American liquefied natural gas (LNG) amounted to about 13 million tons per year. In 2022, this figure almost quadrupled to 51.2 million tonnes.

And in the first half of this year, contracts were signed for the supply of 15.8 million tons of American gas, which is already more than in the whole of 2021.

At the same time, according to S&P Global Commodity Insights, Europe and China together accounted for almost 40% of the volume of contracts for the supply of LNG from the United States, concluded between 2021 and the end of June 2023. Of these, 24.4% came from China, which actively signed contracts with US exporters in 2021 and 2022. This year, Europe is already leading in terms of the volume of transactions with the United States.

In the past few weeks alone, U.S. LNG exporter Cheniere has signed a 15-year deal with Norway’s Equinor and a 20-year deal with China’s ENN, while Venture Global LNG signed a 20-year deal with Germany’s Securing Energy for Europe, the FT notes. France’s TotalEnergies also bought a $219 million stake in a Texas LNG terminal being developed by Houston-based energy group NextDecade.

According to S&P analysts, the actions of Europe and China will negatively affect the ability of developing countries to buy American gas, as they are not always able to withstand price competition with European and Chinese companies. However, this effect will only last in the short term, as in a few years, investments in US infrastructure will allow increasing LNG supplies to the world market. In addition, the current contracts of US gas exporters with European companies provide for the possibility of reselling gas to third parties in the future, the FT notes. And those, remembering their obligations to reduce the level of harmful emissions into the atmosphere and switch to renewable energy sources, will be able to use this option at any time.

Kirill Sarkhanyants