The UK and US have pledged to maintain high levels of liquefied natural gas trade between the two countries as part of a new “energy partnership” that aims to reduce reliance on Russia and accelerate the push to net zero.
Rishi Sunak, the UK prime minister, and Joe Biden, the US president, announced the initiative on Wednesday, which aimed to double the amount of LNG the US sends to the UK compared with 2021 levels — a target that has already been met this year as European countries scrambled to secure alternatives to Russian gas supplies following the invasion of Ukraine.
Neither the US nor UK has a state-backed energy company so flows are primarily driven by market forces, but the two countries said they would work together to ensure “the market conditions for long-term security of supply”.
The two governments said they would set up a joint action group, staffed by senior officials from both sides, to oversee the initiative.
The UK, like the rest of Europe has been hit by soaring prices, but it is less dependent on Russian gas than the EU and its LNG terminals have been used to send additional gas to continental Europe this year.
In a joint statement, Sunak and Biden said the two countries would also recognise “the role of natural gas in ensuring near-term energy security” and “the significance of UK LNG import infrastructure and interconnection to wider European supply security”.
They also sought to emphasise their commitment to the “importance of energy efficiency in bolstering energy security and affordability” while highlighting the “longer-term objective of supporting a stable energy transition to achieving net zero emissions by 2050”.
Sunak said: “We have the natural resources, industry and innovative thinking we need to create a better, freer system and accelerate the clean energy transition.”
The initiative comes nine months after Biden and European Commission president Ursula von der Leyen announced a plan for the US to ship more LNG to the EU this year.
US LNG production capacity has risen to almost 100mn tonnes a year following the start-up of the country’s seventh big plant.
Just over two-thirds of the 71mn tonnes of LNG exported from the US this year has gone to Europe, according to shipping tracker Kpler, as utilities outbid Asian buyers for spare cargoes as they rushed to compensate from Russia cutting supplies.
The UK has taken 8mn tonnes, or almost 11bn cubic metres, twice the volume imported from the US in 2021, Kpler said. The US and UK said they would “strive” to see that level reach 9bn to 10bn cubic metres next year.
US output should rise again in 2023 when the Freeport LNG plant in Texas, which has been offline since the summer following a fire, resumes exports.
But most of the LNG produced in US plants has been bought by utilities — including state-controlled energy companies in Asia — and traders such as Shell or Vitol, which re-sell the cargoes depending on price movements in the global market.
US authorities have no control over the commercial terms of the exports or their destination. Spot cargoes, or those sold outside multiyear supply deals, account for 10 and 20 per cent of total US exports and have been the target of fierce competition between buyers over the past year.
Source: Financial Times