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New EU-US deal to ensure further expansion of LNG export capacity

Oil&Gas Materials 30 March 2022 13:13 (UTC +04:00)
New EU-US deal to ensure further expansion of LNG export capacity
Laman Zeynalova
Laman Zeynalova
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BAKU, Azerbaijan, March 30. The new LNG supply deal between EU27 and the US will likely add momentum to the further expansion of LNG export capacity in the US through improving the regulatory environment and raising incentives for buyers to secure longer-term supply contracts with US LNG producers, Trend reports with reference to Fitch Solutions.

On March 25, President Joe Biden and European Commission President Ursula von der Leyen announced a new LNG supply agreement, under which EU27 will substantially increase LNG imports, starting in 2022. This additional LNG supply will allow European countries to reduce their dependence on Russian pipeline imports, which as of now make up 40 percent of total natural gas supply of EU27. Increasing LNG supplies has been one of the key assumptions of EU27's REPowerEU plan, which calls for a drastic reduction in Russian gas imports to make the block energy
independent of Russia before 2030. In this deal, the US administration has committed to enabling a regulatory environment for new export capacity to come online in order to fulfill this emergency energy security objective.

“We could expect some fast-tracking of the approval process for pre-FID LNG export facilities. However, any regulatory loosening for new gas infrastructure will likely see opposition from political factions supporting a robust climate agenda in the US, despite Biden's commitment to reducing adverse climate impacts (i.e. the GHG emissions or methane leakages) of new infrastructure, also included in the EU27-US deal text,” the company believes.

Fitch Solutiuons also notes that the tightening of the LNG market will likely incentivise buyers to close on longer-term sale contracts for US facilities, which has become an obstacle in reaching FID for a number of facilities in the US. Given limited detail of the mechanics of the US-EU27 LNG deal at the time of writing, we will continue to monitor the story, should more announcements be made.

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