Why Europe will struggle to buy more American gas

Donald Trump has threatened a trade war against the EU if it does not buy more American oil and gas. But although Brussels has been open to the idea, it has no purchasing power and European countries are importing record volumes of cheaper liquefied natural gas from Russia.

The question of whether Europe can act as a bloc and buy more American fuel weighs heavily on transatlantic relations following the inauguration of the US president-elect on Monday.

Large-scale purchasing of our oil and gas. Otherwise, these are the PRICES all the way!!! Trump posted on social media last month.

Shortly after her re-election, the President of the European Commission, Ursula von der Leyen, supported the idea: why not replace [Russian gas] by American LNG?

But the EU's executive body is not a gas buyer and can do little more than signal to the U.S. president-elect that European companies are interested in U.S. LNG, officials and analysts say.

The bloc has committed in 2022 to buying more LNG from the United States. Officials say there are no immediate plans to update that pledge.

What conditions do we need to create for this to happen? We are not going to reconsider everything on January 21, said a European official.

The underlying problem is the bloc's inability to wean itself off cheaper Russian fossil fuels. Last year, EU companies imported record quantities of LNG from the country.

That LNG should come from the United States, said Mike Sommers, chief executive of the American Petroleum Institute, the largest U.S. oil and gas lobby group.

Fearing a supply shortage after Moscow gradually closed the gas pipeline to Europe, the EU did not ban LNG, as it did with Russian coal, or set a price ceiling for Russian LNG shipped by tanker, as was the case for Russian oil.

Instead, the bloc set an indicative goal of completely weaning itself off all Russian fossil fuels by 2027 and authorized governments to ban the country's exporters from using EU gas infrastructure. Some ministers lamented that this was not enough to force companies to break existing contracts.

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LNG could be included in a new round of sanctions, according to European diplomats involved in the negotiations, but this would require unanimous approval of all 27 member states, with Hungary and Slovakia likely opposing it.

U.S. President Joe Biden's administration this month added two small Russian LNG facilities to the U.S. sanctions list, but has been reluctant to list Yamal, a major terminal supplying Europe and other parts of the world.

A very logical move would be for the Trump administration to introduce tougher sanctions against Yamal, given how the new president seeks to promote more U.S. LNG exports to Europe, said Tatiana Mitrova, an analyst at the Center on Global Energy Policy.

American industry is convinced that it has more than enough spare capacity to supplant Russian LNG from the European energy mix.

S&P Global Commodity Insights said a total of 10.3 million tonnes of LNG had already been ordered for Europe from US plants under construction. An additional 9.5 million tonnes are also available to buyers, including in Europe. These volumes exceed the 17 million tonnes of Russian LNG imported by the EU last year and will be online by 2029 or much sooner, S&P said.

Trump promised to lift the freeze on new LNG export capacity imposed by the previous administration as one of his first actions in office.

The EU also has the option of importing more into regasification terminals, which convert shipped liquefied fuel back into gas.

However, price sensitivity is a major problem. While trying to appease Trump, the EU is struggling to protect its industries and reduce high energy prices, particularly in Germany, Europe's largest economy.

Gas prices in the EU are about three times higher than in the United States and have stubbornly remained more than double what they were before Moscow's full-scale invasion of Ukraine in 2022.

The question of prices is delicate and decisive, said a senior European official.

Anatol Feygin, chief commercial officer of Houston-based LNG export company Cheniere Energy, told the Financial Times that business decisions and price signals would determine U.S. LNG flows to Europe, rather than government edicts. .

The United States is very different from Qatar and other parts of the world. There are no direct government-to-government transactions, he said.

One way for Brussels or other EU governments to get involved would be to create a strategic LNG reserve that could include U.S. shipments, Feygin suggested.

EU natural gas demand is expected to fall by up to 25% by 2030 from 2023 levels, according to forecasts from the International Energy Agency, while countries including Qatar and Canada are also expected to bring more production online.

We are at the start of a new wave of LNG supply, said Michael Stoppard, head of global gas strategy at S&P Global Commodity Insights. From year to year, it becomes easier for Europe to find alternatives to Russian LNG, especially from 2026.

Data visualization by Shotaro Tani and Ray Douglas

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