• Ugurcan Turkkan

LNG: Energy Security vs Energy Transition


Liquefied natural gas (“LNG”) is the new black, baby. Interest in LNG reignited in the aftermath of Russia’s invasion of Ukraine and the energy security crisis that followed. Last month, the European Commission published a communication entitled ‘Joint European Action for more affordable, secure and sustainable energy’, which states that Europe will import an extra 50 billion cubic metres (“bcm”) of non-Russian LNG. Following this communication, the Commission’s President Ursula von der Leyen and the United States (the “US”) President Joe Biden agreed on a deal to increase the US LNG export to Europe by an additional 15 bcm in 2022. The agreement further envisages an extra 50 bcm LNG export from the US to Europe by 2030. Join me in my attempt to unpack what is happening and why this agreement matters (in a negative way).

What are Liquefied Natural Gases?

Natural gas is difficult to store and transport. Before the discovery of LNG production, natural gas could only be transported via pipelines, which meant the use of natural gas was mostly limited to domestic networks, and natural gas reserves far from the pipelines and oil and gas processing facilities were too costly to utilise. Further, it needed to be transmitted in the network and used straight away, as it could not be stored for long due to its volume.

The discovery of LNG production, where natural gas is cooled down to liquid form, made natural gas storage for a long time possible and transportation much easier. Large scale liquefaction of natural gas revolutionised the market, as it allowed producers to export their natural gas over the oceans with ships. Upon arrival at the destination, LNG is unloaded to storage tanks and regasified when needed. Ultimately, the discovery of LNG production boosted the versatility of the energy source and made it a contender to other fuels such as oil in the global energy market.

US LNG industry

The US is doing the heavy lifting for Europe in substituting energy imports from Russia. In 2021, Europe imported its LNG from Russia, Qatar, the US, Algeria, and Nigeria, with the former three accounting for around 70 per cent of the total imports. In January 2022, the US significantly increased its export to Europe, supplying half of Europe’s LNG imports alone. According to the data from Refinitiv, the US Energy exports reached a record high with a 16 per cent increase in March. Most US exports went to Europe for the fourth consecutive month, as Europe imports about 67 per cent of US exports. Therefore, the US LNG exporters seem to be the winners of the war between Russia and Ukraine.

Having previously been an importer, the US became a producer of LNG following a recent boom (also known as ‘the shale revolution’) in natural gas production with hydraulic fracturing. This development repurposed the country’s import facilities as export facilities and enabled the country to become a leading global LNG exporter.

The industry, however, is embittered about the last two years. The election of Joe Biden with his "Clean Energy Plan '', commitment to meet Net Zero targets and an increase in the ESG sensitivity of investors crippled the US hydraulic fracturing and LNG industry. LNG companies faced new hurdles for permitting and regulatory processes and their capital needs were rejected by banks and private investors due to ESG concerns. Such circumstances had a negative effect on the available capacity and the development of facilities in the US LNG industry. The chief executive of trade group LNG Allies emphasised that building capacity takes years and increasing the supply is not as simple as turning the switch back on.

Plan: to lick one’s own spit

The US seems to be on a path to backpedal and invest billions in production and export infrastructure to significantly increase its LNG exports to Europe. However, reinvesting in this fossil fuel industry may work toward nullifying the global energy transition efforts. On top of the harm inflicted to the environment from natural gas production, LNG production and transportation adds fuel to the fire (pun intended). Each stage of LNGs’ value chain ramps up the emissions attached to the energy source. These stages are (i) production of natural gas via extraction from underground, (ii) conversion of natural gas to LNG in liquefaction plants, (iii) long distance transportation in LNG ships (tankers), and (iv) regasification upon arrival at the destination. According to the president of Earthjustice, “There is no way to ramp up US LNG exports and deliver on the imperative climate commitments that the US and EU have pledged.”


Energy security concerns of EU member states, as they look to cut their reliance on Russian energy imports, brought the LNG industry back to life in the US. After receiving harsh treatment for two years, the fossil fuel industry regained traction and is on its way to building new production and export facilities. The alarming shift of countries’ priorities is a reminder that when energy security is in question, the climate crisis takes the back seat.

However, as Kelly Sheehan puts it, “we should be rapidly transitioning to affordable clean energy, not doubling down on fossil fuels. Reducing reliance on fossil fuels is the only way to stop being vulnerable to the whims of greedy industries and geopolitics.”