The European Commission and the United States have reached a historic energy agreement that will allow them to cut off Russian gas supplies. Brussels will guarantee a stable demand of 50 bcm/year of additional US LNG until at least 2030, which represents a purchase valued at more than 140,000 million euros. This amount represents almost double the annual gas consumption used by Spain and would allow substituting a third of the gas arriving from Russia. Gas falls 7% after the announcement.
The agreement understands that the supply price formula must reflect long-term market fundamentals and the stability of supply and demand. In particular, the pricing formula should include consideration of the Henry Hub natural gas spot price and other stabilizing factors.
The European Commission will work, for its part, with the governments of the Member States to speed up the construction of LNG import infrastructureto include onshore facilities and related pipelines to support imports using floating regasification unit vessels, and fixed LNG terminals.
The United States and the European Commission will strive to reduce greenhouse gas intensity of all new LNG infrastructure and associated pipelines, including by using clean energy to power on-site operations, reducing methane leaks, and building clean, renewable hydrogen-ready infrastructure.
The European Commission will work to pool demand through a newly created EU energy platform for additional volumes between April and October 2022. Brussels will support the long-term contracting mechanisms and will partner with the United States to encourage relevant contracting to support final investment decisions in both LNG export and import infrastructure.
The EU is preparing an improved regulatory framework for the security of energy supply and storage. In fact, this past Wednesday the Commission proposed a regulation on energy storage to ensure that the existing storage infrastructure is filled to 90% of its capacity before November 1 of each year, with specific provisions for phase-in by 2022 The European Commission will coordinate with Member States and provide transparency regarding available LNG capacity at EU terminals.
The United States and the European Commission will engage with key stakeholders, including the private sector, to make recommendations that reduce gas demand by accelerating the deployment of renewables.
Both blocks will associate to deploy demand response devices (such as smart thermostats) as well as heat pump installations, expanding the procurement of clean energy equipment, investing in innovative technologies, and moving away from fossil fuels.
The United States and the European Union will develop a strategy to accelerate the deployment of clean energy technologiesincluding an expansion of solar, wind and offshore wind power.
both blocks collaborate to advance the production and use of clean, renewable hydrogen to displace fossil fuels, including by investing in technology development and supporting infrastructure.
On the other hand, the United States and the European Commission are determined to negotiate an ambitious emissions-based Global Steel and Aluminum Trade Agreement that incentivizes industrial decarbonization and reduces energy demand.
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