The US, which currently supplies half of Europe's LNG imports and roughly 15% of the continent's total gas supply, would be disproportionately impacted if current restrictions on Russian gas and LNG were to change, according to a S&P Global Commodity Insights study.
The report, ‘US LNG Exports at Risk: Potential Unwinding of Sanctions on Russian Natural Gas’ said that, under an ‘Opening the Taps’ scenario where US sanctions on Russian natural gas pipeline and LNG exports were lifted and new volumes of Russian gas flowed into Europe, more than 17 mill tonnes per annum in new US LNG projects — representing $70 bill in related investment — would be curtailed, compared to the ‘Current Trend’ scenario.
Conversely, an increasing ‘Phasing Down’ scenario on Russian LNG and most piped gas, largely consistent with the EU Commission's REPowerEU Roadmap published on 6th May, would result in an additional 12 mill tonnes in US LNG projects reaching final investment decision (FID), representing an additional $48 bill in investment.
The difference between the ‘Opening the Taps’ and ‘Phasing Down’ scenarios represented 29 mill tonnes per annum in US LNG project FIDs and nearly $120 bill in related investment impact.
"Any changes to restrictions on Russian gas flows to Europe would dramatically impact US LNG in market share and investment," said Carlos Pascual, Senior Vice President, Global Energy, S&P Global Commodity Insights.
"On the downside, unwinding Russia sanctions would reduce the market for US LNG, curtailing investment in future US projects and simultaneously undermining European efforts to diversify gas imports," he said.
US LNG is disproportionately impacted across the scenarios given its nature as the balancing supply for global LNG markets. Its contractual structures and US market liquidity mean that it reacts more quickly to price signals.
Given the volatility seen in policy on gas exports and imports, European policy decisions could evolve over time depending on wider political circumstances in Europe and globally, thus validating all three potential scenario outcomes, the report said.
