Cleaning Up LNG Becomes EU Target in Blow to U.S. Shippers
The European Union is looking at ways to put pressure on global exporters of liquefied natural gas to reduce their greenhouse gas footprint, part of the continent’s effort to slash fossil-fuel pollution.
Officials at the European Commission, the union’s executive arm, are assessing ways to reduce pollution from gaseous fuels as part of the Green Deal, an environmental clean-up of the entire economy. The goal is to step up reductions of carbon dioxide and methane emissions as the 27-nations bloc tightens it climate goals and looks to scale up innovative energy technologies such as hydrogen.
“LNG trade and gas will remain the main topic of our cooperation with the U.S. in the years to come,” Anne-Charlotte Bournoville, head of the international relations and enlargement unit at the EC’s energy directorate, said on a webinar on Thursday. “At the same time, you see the direction of EU energy and climate policy. We need to achieve our 2050 ambition of climate neutrality.”
While the EU’s effort would apply worldwide, it would add a source of tension with the U.S. government. President Donald Trump has sought to promote LNG exports to Europe as a way to diversify the continent’s sources of energy. The number of U.S. cargoes arriving in Europe has surged in the past two years, with eastern members of the bloc prodded to buy “freedom gas,” instead of fuel from Russia.
At the same time natural gas and LNG, once touted as bridge fuels to smooth the transition away from coal, have come under increased scrutiny as governments chase more ambitious climate targets. Last month, Engie SA shelved plans to buy LNG from U.S. exporter NextDecade Corp., handing a victory to an environmental group that had urged the French utility to drop the deal on pollution concerns.
The French decision shouldn’t be seen as “the beginning of a huge wave in a push to change things in Europe,” said Fred Hutchison, president and chief executive officer of the U.S. nonprofit association LNG Allies.
A number of European companies from Royal Dutch Shell Plc to Total SA and Centrica Plc have long-term U.S. LNG contracts, he said.
“The notion that somehow were moving in a situation where it’s going to be unacceptable we don’t think that’s the case,” Hutchinson said.
The consultant Kayrros SAS estimates the visible methane intensity of U.S. LNG from the Permian Basin is nearly 20 times more than supplies from Russia, according to 2019 emissions data observed by the European Space Agency’s Sentinel-5P satellite. The spacecraft doesn’t capture all methane leaks but can detect large releases and clusters.
The EC is analyzing policy tools to reduce greenhouse gases from the gas sector under a legislative package to be proposed next year. One of the options under investigation is an introduction of green certificates for LNG cargoes, according to Bournville.
The Brussels-based commission already adopted a strategy to improve the measuring, reporting and verifying methane emissions last month. While this initiative will not directly impact U.S. LNG sales into Europe, the issue of tackling methane leaks is set to become a prominent topic in discussions with the U.S..
“Indeed we’re implementing equivalent standards that are either enforced at state or federal level in the U.S,” Bournoville said. “However, European purchasers may show a preference for the best in class and so there could be impacts within the U.S. market with those with the best performance getting the best terms in the European markets.”
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