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First U.S. Natural Gas Shipped to Poland
Countries reliant on Russia for energy supplies are hopeful the U.S. energy boom will keep on coming.
Poland just took a symbolic step forward in wresting itself from Russia’s energy dominance.
On Thursday, the first ever liquefied natural gas shipment from the United States arrived in Poland, a landmark of sorts in Europe’s continuing drive to diversify the sources of its energy imports. The gas came from an export terminal in Louisiana that was first out of the gate to exploit the U.S. shale boom to supply the global market.
For Warsaw, the first delivery is fruit of new energy infrastructure that allows it to reduce near total dependence on Russian imports, following closely in step with neighboring Lithuania’s move to open its own floating LNG terminal.
“It’s very important, it’s a milestone,” one Polish diplomat told Foreign Policy. The diplomat said energy diversification is a top priority for eastern Europe countries in Russia’s shadow, a safety net if Moscow ever decides to cut supplies in geopolitical ploys against its neighbors — something it has repeatedly done in the past.
Eastern European countries like Poland and the Baltic states have already suffered past episodes of Russian energy bullying. Now, they are increasingly unnerved by Russia’s tense showdown with NATO over Ukraine, Syria, and a slew of other geopolitical minefields. But they also remain heavily reliant on Russian energy.
Russia, for its part, is just as reliant on cash from its energy exports to Europe to shore up its anemic economy. (Europe is by far the biggest market for Gazprom, the big natural gas firm, grandiose plans to expand to China notwithstanding.) As Europe diversifies its gas supplies — from the United States, Norway, and other gas exporters like Qatar, Russia will face a choice between losing its big share of the market — and the political clout that comes with it — or lowering prices to stay competitive.
“[Russia] will have to rethink their tactics and strategy … they’ll have to consider the United States as an increasing power in the European gas market,” the diplomat said.
What’s more, as U.S. and European energy officials point out, the mere availability of U.S. natural gas in the global market can be a boon to countries even when they don’t physically receive gas. Gazprom was forced to slash its price for Lithuania by 20 percent after the small Baltic country opened its floating LNG terminal, simply because it suddenly saw the prospect of competition in the future.
Extra supply of affordable U.S. natural gas in the global market has also pushed down contract prices for gas in other parts of Europe and in Asia, benefiting consumers and industry. The United States, in other words, isn’t just exporting gas: It is also exporting America’s low gas prices.
That doesn’t mean Russia’s going anywhere. It still supplies Europe with 35 percent of its total gas imports, and 13 European countries rely on Russia for over 75 of their annual gas imports. LNG shipments from the United States won’t change that.
“It’s not practical to say Russia is going to replaced as a supplier,” one State Department official told FP, speaking on condition of anonymity.
Still, it needn’t be overly dominant. During the George W. Bush and Obama administrations, the United States sought to help Europe diversify its sources of energy. That’s because Russia habitually used disruptions of energy exports — especially in 2006 and 2009 — to try to cow smaller neighbors, such as Ukraine or the Baltic countries. U.S. efforts included working with Europe to build more connective tissue so that energy supplies could flow throughout Europe more easily, as well as supporting the development of new infrastructure like LNG terminals and pipelines.
The Trump administration said it will continue to support Europe’s diversification efforts. Mary Warlick, the State Department’s top energy diplomat, said at an event Wednesday at the Atlantic Council, that Washington supports Europe’s efforts to find new sources of supply — including exports from the United States, but also other projects, like a new pipeline to bring gas from the Caucasus into Southern Europe.
The flip side of that is concern in Washington — shared by many in Central and Eastern Europe — about Russia’s plans to build yet another gas pipeline to Europe. The Nord Stream 2 project would bypass Ukraine, costing Kiev billions of dollars in transit fees, and redouble Europe’s dependence on Russian gas by funneling 80 percent of Russian gas imports to the European Union through one big route. That would “significantly increase Europe’s vulnerability to a supply disruption,” Warlick warned in Brussels last week.
Polish authorities have tried to trip up the project on antitrust grounds, and there is also a campaign afoot to block the pipeline on environmental grounds. Many Eastern European countries have attacked the project as a Russian geopolitical ploy to strengthen its energy leverage over Europe, rather than a commercial project that makes economic sense. (The existing pipeline is not used at full capacity, and European gas demand growth is pretty much flat, making it hard to justify a new $10 billion pipe.)
Warlick said the project’s geopolitical ramifications raise “concern” for the Trump administration. However, the project is supported by a handful of Western energy companies and seems to have the tacit support of Germany, which would be a big beneficiary of the new pipeline.
And while Thursday’s LNG shipment is welcome news for Poland, it is not yet a reprieve from the threat of Nord Stream 2.
“The problem of Nord Stream 2 still looms large, as this is a pipeline with a much greater capacity that has major regional implications,” said Sijbren De Jong of the Hague Center for Strategic Studies. “That is not shoved aside by the arrival of U.S. LNG at this point.”
While the debate over Nord Stream 2 plays out, Poland is eager to accept non-Russian gas wherever it can get it. In recent weeks, Warsaw signed a gas contract with Qatar and announced plans to increase its capacity to import liquefied natural gas by about 50 percent.
Photo credit: Sean Gallup/Getty Images