OPINION: With Russia looking like a schoolyard bully in its posture towards Ukraine, the energy picture for western Europe seems increasingly muddled.

If Russia invades Ukraine, the European Union would probably sanction Russian energy exports — which, in turn, would lead to a huge opportunity for US liquefied natural gas exports. Right?

Right?

To the severe frustration of the US and, perhaps, the EU, the answer is probably going to be a disappointing no. Western Europe is hooked on natural gas from Russia, and increased American LNG shipments probably wouldn’t be enough to kick the habit.

The two reasons for this are pretty simple and disappointing: supply and the ability to accept that supply.

Germany might be happy to take US LNG if it could, but north-west Europe has few LNG import facilities, and they’re maxed out at the moment.

Germany, Europe’s largest gas consumer in Europe, does not have a single import facility.

Domestic energy company Uniper had plans for a 10 billion cubic feet per day import facility to be built in Wilhelmshaven. The obstinate opposition to the project contributed to its abandonment in 2020.

The Brunsbuttel LNG project in Germany stalled last year when Vopak of the Netherlands bailed out.

So the Germans have no LNG import facilities, are shutting down nuclear power plants and, presumably, do not have a desire to freeze in the dark. They’re reliant on Russian gas.

The EU has about 150 billion cubic metres of LNG import capacity, but only a handful of import facilities in member nations have been granted exemptions from EU rules on regulated third-party access, which is where most American exports go. There is one in France, one in Italy and one in the Netherlands. That’s it.

Three more are in the UK.

By the end of 2022, the US will be the world’s largest supplier of natural gas, with about 13.9 billion cubic feet per day, or 393.6 million cubic metres per day. That’s more than enough to fill all the EU regasification facilities, and the US is the largest exporter of LNG to Europe.

But how much more can the US send?

Probably not much. For one thing, US LNG will still go to the most profitable location, and in many cases that ends up being Asia. Prices in Europe are still very high, which will increase appeal, but not all cargoes will head to the EU.

There is also the problem that the US isn’t going to add capacity any time soon after 2022. It will be two more years before any planned LNG project comes online. And by then, the crisis will probably be over and the “opportunity” will have been lost. It’s not a situation in which you can just flip a switch and flood the market.

The US would like to ship more LNG to Europe. It probably can’t. The EU would like to receive more US LNG. Through its own shortsightedness, it’s incapable of doing so.

So who wins? Vladimir Putin.

(This is an Upstream opinion article.)

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