US LNG Policy Under Fire – Energy Analysis

If anywhere it's clear how closely energy and politics are intertwined, it's in the gas and electricity markets. Gas is becoming a geopolitical commodity. Russia almost seems more involved in Europe than the US. In the Netherlands, the ongoing saga surrounding the phasing out of the networking plan is now up to the Senate. Ministers are warning that if the House does not vote in favor of his plans, there will be a hole in the budget.

Natural gas has found its way into the European TTF futures market. Mild weather in our region, ample reserves and adequate gas supply from Norway, among others, keep gas prices in check. Yesterday the March contract closed at €25.79 per MWh. Compared to the beginning of winter, gas prices have been cut in half.

The average fill level of European gas storage facilities on February 10 was 67%. For gas supplies, we mainly look to Norway and the US, but Russian gas also regularly goes to the EU. In fact, Russia will continue to supply LNG from the Yamal plant to German SEFE until December 31, 2040, Reuters news agency reported. SEFE is the former German division of Gazprom. The German government nationalized the company for billions of euros after what the Kremlin calls a 'special military operation' in Ukraine. Initially, Moscow Gazprom banned exports to several companies, including Germany. In 2022, Russia exempted LNG exports. Novatek, Russia's largest LNG producer, has now announced that the exemption will be extended until 2040.

LNG brings sustainability
In the US, a group of former top officials who served under the last two Republican presidents (Trump and Bush) have called on Congress to vote against Biden's 'pause legislation' on LNG exports. Under pressure from the environmental movement, Biden wants to critically scrutinize new LNG projects, citing greenhouse gas emissions and the effects of LNG plants on vulnerable communities. The US LNG sector is growing due to high demand from Europe and Asia. Former top officials believe US LNG exports contribute to global stability. “It is imperative that we continue to advance our economic, energy and geopolitical interests while leading environmental progress,” the former officials wrote in a letter to Congress.

With Russia a less stable gas supplier and debate over LNG in the US, Europe is increasingly dependent on gas from Norway. The Norwegian Secret Service is concerned about this. According to Norwegian military intelligence, Norwegian gas and oil installations could be the target of 'incidents, physical sabotage and destructive cyber attacks'.

The power market has been stable for the past one week. We haven't seen a range of €25 between the highest and lowest prices in the last few days.

EDF, which operates nuclear power plants in France, shut down two reactors in Chinon after the fire on Saturday. The fire broke out in the non-nuclear part of the plant, but the reactors were shut down as per safety protocol. Chinon is one of the oldest nuclear power plants in France. Germany has rapidly shut down nuclear power plants. This does not mean less power demand. German gas-fired power plants had to make significant efforts last January. Since January 2022 (just before the Russian invasion of Ukraine), German gas-fired power plants have not produced much electricity. Despite the desire to accelerate greening, Germany remains dependent on fossil fuels, various experts note.

End of network arrangement
In the Netherlands, the phasing out of the grid scheme for solar panels is on the Senate's agenda. In a letter to the Senate, the outgoing climate and energy minister said if the House blocks phasing out the grid plan, the new cabinet will have to find ways to close the gap in the budget. “If the bill is not passed, coverage must be sought for loss from 2025 and structural loss from 2031. This is about structural loss without an end date as no alternative solution is provided,” says Jetton.