(Bloomberg) – Less than two years ago, Engie SA scrapped plans to buy U.S. liquefied natural gas, handing a victory to environmentalists who called on French power giants to stop buying over pollution concerns.
Fast forward to 2022 and that agreement has been signed, along with an agreement with Bulgaria and Poland to bring American freaked gas to the European coast.
The war in Ukraine has prompted Europe to restructure its energy policy, and the exclusion of the once US LNG is now a key part of the European Union’s strategy to rid itself of Russian gas, which is expected to be outlined this week. As countries from Germany to Italy seek to reduce their dependence on Moscow, supply security has in many cases downplayed climate concerns.
LNG is not only a fossil fuel, it is also polluted by the way it is extracted, liquefied by energy-intensive processes and shipped around the world. U.S. supplies tend to be dirtier than other countries because they come from thousands of shell wells. But American producers who want to attract European clients are taking steps to cut their footprint.
“Currently, supply security is important, but we need to keep a broader picture in mind,” said Daniel Stoves, commercial director at Hansetic Energy Hub, one of the LNG terminals Germany plans to build to reduce its dependence on Russia. “We notice that the LNG industry is taking the task of reducing methane emissions seriously.”
Europe is at the forefront of climate ambitions with plans to reach net-zero by 2050, including the replacement of fossil fuels with renewable-energy sources such as solar and wind. But as the EU seeks to reduce its Russian gas imports by two-thirds already this year, LNG is once again becoming lucrative.
The European Commission is set to announce a 195-billion-euro ($ 203 billion) overhaul of its energy strategy on Wednesday. The plan is expected to replace about 50 billion cubic meters of Russian gas with LNG, or about one-third of pre-war imports.
“The current EU directive for more US LNG procurement is essentially a U-turn,” said Kaushal Ramesh, an analyst at Norwegian Consulting Ristad Energy. “While it may suggest that the EU has softened its stance on the impact of US LNG emissions – energy security on environmental concerns for now – it could accelerate an energy shift within the US LNG sector.”
According to Wood Mackenzie Ltd., the production process of US LNG is more CO2-intensive than that of Russian gas. But add dangerous and unpredictable methane leaks from old pipelines that run 3,000 to 4,000 kilometers through Siberia that can sometimes produce Russian gas. Overall more emissions than American supplies.
According to a report by the Rocky Mountain Institute, gas transportation through the Russian pipeline is three times more climate-intensive than shipping from the United States.
“By replacing the high-emission Russian gas with US LNG, Europe may be able to improve its energy security and reduce its greenhouse gas emissions,” said TJ Conway, a RMI climate intelligence officer. “But our modeling shows that emissions can vary greatly and can actually be high, especially if methane is not effectively managed.”
Methane is a much more powerful greenhouse gas than carbon dioxide, but it stays in the atmosphere for decades instead of decades. Any attempt to reduce it could provide a quick win for the planet.
Better transparency is needed to properly access the climate effects of both Russian gas and American LNG. Cheniere Energy Inc., the top U.S. shipper of super-child fuels, plans to determine the carbon intensity of each cargo and the amount of emissions starting from the wellhead to its customers later this year.
NextDecade, which has finally signed an agreement with Engie, aims to reduce CO2 emissions from its LNG plant by more than 90% through carbon capture and storage technology.
Still, environmentalists are concerned about locking up more reliance on natural gas, no matter where it comes from. Europe is building new LNG infrastructure, with at least six new facilities announced in countries including Germany, Estonia and the Netherlands.
“The European Union has those climate neutrality goals, but they do not necessarily guarantee that they have been met,” said Murray Warthy, head of the gas campaign at the non-governmental organization Global Witness. “Building new LNG infrastructure will lock-in or slow down the flow of gas into homes, heating, industry and electricity. Once these things are created, the financial incentive to run them for a lifetime is huge. ”
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