27 Jun 2022 | 11:57 UTC

Russian gas supply cuts 'underscore' importance of US-EU action on energy

Highlights

US LNG supplies to Europe almost tripled in 2022: presidents

To discuss 'actionable' policy recommendations in coming days

To include acceleration of heat pump deployment, production

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The cut in Russian gas deliveries to a number of EU member states "underscores" the importance of collaboration between the US and the European Commission on ending reliance on Russian energy, US President Joe Biden and EC President Ursula von der Leyen said June 27.

In a joint statement, the two presidents said immediate steps to further reduce Russia's energy-derived revenues were "important and necessary" while also recognizing the "enormity" of the challenge.

"Russia continues to use natural gas as a political and economic weapon," they said, adding that Russia's energy "coercion" had put pressure on energy markets, raised prices for consumers, and threatened global energy security.

A total of 12 EU countries have so far suffered either a partial or total reduction in Russian gas supplies.

Starting in April, Gazprom has now halted supplies to buyers in Poland, Bulgaria, Finland, the Netherlands, Denmark and Germany due to their refusal to comply with Moscow's new ruble-based payment mechanism.

Gazprom on June 16 also cut flows via the key Nord Stream pipeline to Germany to just 40% of capacity, citing maintenance issues with turbines at a key compressor station.

The reduced Nord Stream flows have also had knock-on effects on supply to a number of other EU countries including France, Austria and Slovakia.

High prices

European gas prices remain at sustained highs due to the Russian supply uncertainty.

The TTF month-ahead price was last assessed on June 24 at Eur129/MWh, up 56% since the start of the month and 310% higher year on year, according to Platts price assessments by S&P Global Commodity Insights.

LNG has helped make up for lost Russian volumes, with deliveries up by 75% to Europe so far in 2022 compared with the same period last year, the US and EC presidents said.

They said US LNG deliveries to Europe had almost tripled in the same period.

"While Russia has cut supplies of gas to several EU member states, the US and other producers have stepped up," the presidents said.

According to data from Platts Analytics, US LNG supplies to the EU, UK and Turkey in the first five months of 2022 totaled 36 Bcm of gas equivalent, up from 14.6 Bcm in the same period last year.

US LNG supplies to just the EU totaled 25.3 Bcm in the period, up from 10.2 Bcm in January-May 2021.

In March, the US pledged to supply an additional 15 Bcm of LNG to the EU in 2022, while Brussels in turn agreed to work to ensure stable demand for US LNG that would allow for an additional 50 Bcm/year of supplies to 2030.

The EC and US also agreed to establish a joint task force on energy security to set out the parameters of new EU-US cooperation.

"The task force has met regularly to discuss options to reduce Europe's demand for gas and has also met with key stakeholders to promote the deployment of heat pumps, smart thermostats, and energy demand response solutions," Biden and von der Leyen said.

They said that in the coming days they would reconvene with EU member states and stakeholders to discuss actionable policy recommendations to accelerate smart thermostat and heat pump deployment and production.

Southeast Europe

The EC has also established the first "regional energy platform" for southeast Europe to support gas diversification of the region traditionally dependent on Russian supplies.

"The US is a key partner for the sustainable diversification of gas supplies to this region and other acutely impacted EU member states, including by supporting demand reduction and accelerating clean technologies," the presidents said.

US LNG is seen as a key source of alternative gas supply in particular to Bulgaria, which can import regasified LNG via Greek and Turkish LNG import infrastructure.


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