The Europeans know their interests: the more sources and supply routes, the better. Therefore, they have consistently advocated both Nord Stream 2 and LNG supplies from the United States or from the Russian Arctic. As for any attempt to artificially restrict competition and raise prices for European consumers, they will brandish environmental counter- “sanctions”, saying that US LNG is dirty, writes Valdai Club expert Alexei Grivach.
It was 134 years ago, on 28 October 1886, that the Statue of Liberty was inaugurated in the United States, a gift from the French people to the Americans in honour of the centenary of victory in their war for independence from England. It is believed that the king of France contributed a lot to the US Independence. The money for the colossal gift was collected by crowdfunding, then an unknown concept, and although the statue arrived 10 years late for the nation’s 100th birthday, the meaning did not change. Paris stood at the origins of American statehood, and sought to consolidate its status as a special partner. The idea was not entirely successful, as the course of subsequent history showed, but after more than a hundred additional years, France has remained an important partner of the United States in Europe, a NATO member and a permanent member of the UN Security Council. It is, unlike Germany, a real political heavyweight.
It is perhaps just as fittingly symbolic that Paris responded asymmetrically to Washington’s recent gunboat diplomacy of promoting its liquefied gas in the European market.
Unnamed industry sources reported last week that the French government had strongly recommended that the country’s largest energy company, Engie, and a major buyer of Russian gas and one of Gazprom’s partners in the Nord Stream 2 project, should postpone or altogether cancel the signing of a 20-year LNG purchase contract with NextDecade, a company from Texas. The pretext for the extravagant request was the alleged concern of the authorities about the compliance of the prepared deal with the environmental guidelines of the European Union. The conditions of the frozen contract were not disclosed. Actually, its very possibility became known after a leak of information about the position of French officials. There is only an estimate of its amount – $7 billion. It sounds impressive, but even at current prices, it will not entail more than 2 million tonnes of LNG per year. The European Union consumes about the same amount of gas in two days and imports this amount from Russia in less than one week.
Moreover, this is not much even for the main NextDecade project – Rio Grande LNG, which should have a capacity of 27 million tonnes per year. The company had planned to make an investment decision next year and begin shipping in the middle of the decade. But despite obtaining all necessary permissions, it has not yet collected a portfolio of orders. Engie was to become only the second client. Curiously, the only NextDecade contract to date for the supply of LNG with Rio Grande LNG was signed with the Anglo-Dutch Royal Dutch Shell, a partner of Gazprom in Nord Stream 2, like Engie. And the volume of the contract is 2 million tonnes of LNG per year.
That is, the plant has been contracted by less than 10%. And without new agreements, there will be no investment decision either in 2021 or later. In this sense, the French demarche hit its target – it strikes directly at plans to further increase the United States’ LNG export potential. However, it should be noted that finding a sufficient number of buyers willing to enter into long-term contracts at an acceptable price for the supplier (including NextDecade) is very problematic.
Even with a French contract, the likelihood of an investment decision would be extremely small, not to mention the fact that at Engie itself, the position of CEO has remained vacant since February. A new CEO has already been found, but Catherine McGregor will take the helm only early next year. It is clear that signing large contracts amid a protracted change of leadership is extremely difficult.
US Department of Energy spokeswoman Jessica Szymanski said it was “short-sighted and narrow-minded to delay LNG projects for political posturing.” Really?