The U.S. Administration is in talks with energy companies and major gas-producing countries globally about the potential for a large supply of natural gas to Europe in case Russian deliveries are interrupted if Russia invades Ukraine, U.S. officials with knowledge of the talks told CNN.
Russia, which supplies over one-third of the natural gas that Europe consumes, could weaponize gas deliveries if the West imposes sanctions on Moscow over a possible invasion of Ukraine, European allies of the United States fear. In addition, in the event of military action and subsequent energy sanctions against Russia, Europe will be hit the first and the most, including in its gas supply from Russian gas monopoly Gazprom, analysts say.
The standoff between Russia and the West over Ukraine continues amid the Russian military buildup on the border with Ukraine. On Monday, the U.S. Department of State authorized the voluntary departure of U.S. government employees and ordered the withdrawal of family members of U.S. government employees at the U.S. Embassy in Kyiv, Ukraine, effective immediately.
Amid the continued threat of possible Russian aggression against Ukraine, the Biden Administration is seeking to reassure Europe about its natural gas supply at a time of record-high gas and power prices amid low gas inventories and lower-than-normal supply from Russia.
Norway and Qatar, major gas producers and exporters, are among the countries with which the U.S. has been holding discussions about higher supply to European customers, according to CNN’s sources.
Earlier this month, Reuters reported, citing industry sources and U.S. officials, that the Biden Administration has been looking at contingency plans for alternative supply to Europe if a Russian invasion of Ukraine disrupts gas flows to Europe.
The international energy companies approached by the U.S. told officials that natural gas supplies globally were tight, and there wasn’t too much gas available to replace Russia’s large amount of supply, the industry sources told Reuters.
By Tsvetana Paraskova for Oilprice.com
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Now the United States is continuing the charade by having talks with major gas-producing nations such as Qatar and Norway about supplying Europe in case Russian deliveries are interrupted with the same ploy of exporting more LNG to Europe.
In terms of natural gas supplies and rocketing prices, Europe won’t be out of the energy crisis embroiling it soon. A harsh winter could push gas and power prices which are already near record levels higher still in the first half of 2022. This could be due to the fact that European gas storage levels are extremely low.
As of January 22, the volume of natural gas in European underground storage facilities stood at 14.9 billion cubic metres (bcm) or 26% of storage capacity. Moreover, the occupancy of underground storage facilities in Germany stands currently at 41.8% whilst that of Ukraine stands at 12.1 bcm or 44.6%.
Neither Qatari or US or Australian LNG nor Norway’s and Netherland’s gas exports could satisfy the energy demand of the EU countries. Only Russia can. However, Russia may not be inclined to ship additional gas supplies to the EU without an early certification of Nord Stream 2. Moreover, Russia has a choice. It isn’t dependent on the European gas market for its gas. On January 18, Russian gas supplies to China broke new records.
Gas prices in Europe could fall if Nord Stream 2 gas pipeline is certified. Moreover, the commissioning of Nord Stream 2 might well be the only option to refill European gas storage and avoid a repeat of last year's winter crisis.
As a matter of fact, it wasn’t Russia that has been weaponizing gas deliveries. It is the EU which has been politicizing energy by delaying the certification of Nord Stream 2. However, if the West imposes sanctions on Russia in the event of the Ukraine crisis escalating into a military conflict possibly involving the United States and NATO, Russia will cut all its gas and energy supplies to Europe and stop whatever gas it exports to Europe via Ukraine.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London