The European Union (EU) is discussing backing investments in overseas fossil fuel infrastructure and moving to long-term LNG contracts in an attempt to cut high energy prices, according to a proposal seen by newswires.
This move would mark a major change in the bloc’s energy policies, strengthening Europe’s link to LNG imports, which it eventually wants to phase out as part of its net zero plans.
Currently, EU members only sign short-term LNG contracts and have tried to limit the use of public money to expand fossil fuel extraction, the Politico portal said.
Also on the cards was the prospect of European government funds being used to finance US LNG projects, as EU officials try to hammer out a deal with President Trump to buy more US energy and avoid a trade war.
This proposal is part of an EU ‘Action Plan for Affordable Energy’ which was due to be released yesterday.
The plan will ‘lower energy bills in the short term, while fast-tracking much-needed cost-saving structural reforms and reinforcing our energy systems to mitigate future price shocks,’ the statement said.
Prepared by the European Commission (EC), it also raised the prospect of… ‘the option of longer-term contractual engagements to make prices more stable.’
This could include schemes ‘whereby the EU and/or member states accompany EU importers in investing directly in export infrastructure abroad, providing preferential loans to private investors or by securing gas liquefaction rights.’
EU Energy Commissioner, Dan Jørgensen confirmed the need to increase US LNG imports in a joint media interview on 21st February.
Russian gas imports to the EU had dropped by 75% in January, European Commission President, Ursula von der Leyen, claimed.
"Instead of using taxpayers' money, citizens' money, to pay for gas where the revenue goes into (Russian President Vladimir) Putin's war chest, we need to make sure that we produce our own energy," Jørgensen said.
He added that Brussels is preparing changes to its permitting rules to speed up the construction of renewable energy facilities.
"There will still be a need for gas, and we will have to look for sources other than Russia, and that could also mean more imports from the US," Jørgensen added.
US plant investment
In the document, the EU referred to the ‘Japanese model,’ which involves the government directly buying stakes in overseas LNG ventures in exchange for continued access to gas at preferential rates.
By using this approach, Tokyo has become the largest public investor in US LNG projects, spending tens of billions of dollars and importing record levels of US gas in recent years.
The Japan/US LNG relationship deepened earlier this month when Japanese Prime Minister, Shigeru Ishiba flew to Washington, DC, to meet with President Trump.
“Japan will soon begin importing historic new shipments of clean American liquefied natural gas in record numbers,” Trump said after the meeting.
He is also pressing the EU to buy more US LNG, threatening to impose severe tariffs if the bloc doesn’t meet this and other demands.
Brussels is sending envoys to Washington to negotiate and is keen to strike an LNG deal. EC President, von der Leyen, claimed that this was a way of finally quitting Russian LNG usage, Politico reported.
The bloc wants to move fast on the LNG procurement plan, vowing to act by July.
Meanwhile, with European gas demand at an 11-year low, LNG imports into the EU fell 16% last year, compared to 2023.
The Institute for Energy Economics and Financial Analysis (IEEFA) reported recently that the EU’s regasification terminals were running at an average of just 42% capacity, with many barely used.
Since February, 2022, the EU has added import capacity of around 50 bill cu m of gas per year, mainly in Germany, the Netherlands, Italy, France and Finland.
Based on current plans and demand trends, total capacity could be utilised at just 30% by 2030, the energy transition think tank predicted.
“Doubling down on new LNG terminals without taking into account demand trends raises the risk of over investment and infrastructure being under utilised as the energy transition accelerates,” said Ana Maria Jaller-Makarewicz, IEEFA’s lead analyst for European energy.
