Energy bills boost as US to ship more gas to Europe in boycott of Russia
THE EU and US yesterday struck a major deal aimed at reducing Europe’s reliance on Russian gas.
The agreement means the US will increase shipments of liquefied natural gas by the end of the year in a move that comes in direct response to Vladimir Putin’s invasion of Ukraine.
The EU wants to cut dependency on Russian gas by two-thirds this year and end all fossil fuel imports from the country by 2027. Russia currently supplies around 40 per cent of Europe’s gas needs.The UK gets less than five per cent of its gas from Putin.
Security
The agreement has been said to act as a floor, rather than a ceiling for what will be delivered. One European Commission official said: “Our aim is to go upwards as quickly as possible.”
US President Joe Biden said the energy weaning process was key to squeezing Putin, saying: “These steps will increase energy security and national security.
“I know eliminating Russian gas will have costs. But it is not only the right thing to do from a moral standpoint, it’s going to put us on a much stronger strategic footing.”
European Commission President Ursula von der Leyen said the EU was “right on track now to diversify away from Russian gas and towards our friends and partners – reliable and trustworthy suppliers”.
Uncertainty over supplies has driven global wholesale gas prices to record highs.
UK households are already being hit with soaring bills and the jump in wholesale costs threatens to drive prices even higher.
The hope is the deal may bring longer term confidence to markets with the guarantee of a gas supply from beyond Russia.
Wholesale prices remained mixed yesterday. The British gas price for day-ahead delivery rose by 13p to 245p per therm, while the within-day contract was down 19.75p at 235.25 p/therm. It’s down sharply from spikes early in the Ukraine crisis but still up considerably over the past year.
Russian gas deliveries to Europe on three key pipeline routes were broadly steady yesterday.
Under the new agreement, the US will work to supply 15 billion cubic metres (bcm) of liquefied natural gas (LNG) to the
EU this year. Concerns over the security of supply were reinforced this week after Russia ordered switching gas contract payments to roubles, raising the risk of a supply squeeze and even higher prices.
Europe hit back, saying contracts with Gazprom stipulated payments should be made in either euros or US dollars.
The promise of increased LNG shipments comes despite US plants already running at full capacity. Analysts say most of any additional US gas sent to Europe would be from exports that would have gone elsewhere. Alex Froley, gas and LNG analyst at ICIS, said: “It normally takes two to three years to build a new production facility, so this deal may be more about the re-direction of existing supplies than new capacity.” LNG is produced by cooling gas to around minus 160C, when it becomes a liquid. It is then usually transported by sea in supertankers. The other large LNG exporters are Australia and Qatar. Records show 13 shipments of LNG are due to arrive in the UK between now and mid-April. Of those, eight are scheduled to come from the US.
Mr Biden and Ms von der Leyen also announced a taskforce aimed at cutting reliance on Russian fossil fuels. Germany, the EU’s biggest importer of its gas, said it has made “significant progress” towards reducing its exposure to Russian gas, oil and coal.