Lake Charles’ LNG turns Germany against Russia
2nd March 2022 · 0 Comments
By Christopher Tidmore
Contributing Columnist
In response to Russia’s invasion of Ukraine, UN Ambassador and Louisiana native Linda Thomas-Greenfield told the Security Council last Wednesday, “We’re here for one reason and one reason only: To ask Russia to stop. Return to your borders. Send your troops and your tanks and your planes back to their barracks and hangars. And send your diplomats to the negotiating table, back away from the brink before it is too late.”
Thomas-Greenfield threatened a series of sanctions and unified NATO action if Vladimir Putin did not pull back. President Biden supported her promise in a nationally-televised press conference Thursday night, instituting what he called “profound” sanctions against Russia, all coordinated with the G-7 and unanimously supported by the European Union.
These new prohibitions effectively cut off Russia’s economic links to the rest of the world. More importantly, Biden pledged to boost NATO’s military presence on the Russian border with 7,000 more American troops. Particularly, the U.S. president citied how this surge in military force would deploy through Germany to Eastern Europe in order to counter any Russian threat to alliance members. Six weeks ago, the German SDP-led cabinet would not allow any weapons or soldiers to flow to either Ukraine or NATO’s Eastern European allies, via its territory which might threaten Russia. Their reticence to involve Germany in any direct military participation – at any level against Russia – reversed completely in the last two weeks, and some insiders believe that it was thanks, in part, to Louisiana’s Natural Gas exports.
Biden and Thomas-Greenfield were only now making such a credible implication of a unified NATO military and financial response because Germany suddenly (and surprisingly to many) last week canceled the Nord Stream 2 pipeline, abandoning its middle ground position and openly criticizing the Kremlin – as bombs began to fall. German Chancellor Olaf Scholz’s change of heart from Putin apologist to ardent critic may have come – in part – thanks to Louisiana shipping enough natural gas to his country that Russian petrochemicals no longer stand as essential to the German economy as a few months previous.
Should America’s NATO allies go further and send cutting-edge weaponry to back Ukrainian independence, it will be, in part, because January marked a seminal moment in European energy independence from Vladimir Putin’s Russia. January 2022 saw U.S. exports of liquefied natural gas to Europe exceeded Russia’s pipeline deliveries – natural gas mostly shipped from Calcasieu Parish’s LNG Port and mostly derived from U.S. shale. That is no small change, as Russian LNG exports accounted for 1/3 of Germany’s electrical fuel supply as late as the Autumn of 2021.
Lake Charles’ liquefied natural gas port facilities provide nearly all of the United States’ Atlantic-based export capacity of natural gas exports to Europe. Germany, which closed its nuclear power generation facilities after the Fukushima nuclear disaster under pressure from domestic environmental activists, relies almost completely on natural gas for power generation— hence the previous unwillingness to offend their primary Russian supplier.
Russian LNG exports had accounted for about 30 percent of Europe’s overall gas use, yet they dropped substantially because of Russian price surges in the weeks prior to the Ukrainian invasion. European gas costs jumped by nearly a factor of four prior to the eve of the invasion. As a result, U.S. LNG exports from Louisiana surged to fill the gap.
In the post-COVID recovery, the U.S. once more became the world’s top petrochemical producer, almost 20 percent above the other two largest producers, Saudi Arabia and Russia, mostly due to the current upswing in shale output from the U.S., with potential to add 900,000 barrels a day this year. As a result of the extra capacity, the U.S. also took the lead as the world’s largest LNG exporter, ahead of Australia and Qatar. In a tight global gas market, U.S. LNG, emerging from the sole operating East Coast port at Lake Charles, remains the key to keeping the lights on in Europe, as demonstrated by the flotilla of tankers headed to Europe from the Gulf Coast last month.
Put another way, even if every drop of natural gas flowing through Russian pipelines to Germany were cut off in the wake of the invasion, the current LNG exports from Calcasieu Parish could just barely make up the deficit currently thanks to the Phase II expansion that partners Energy Transfer Equity and Royal Dutch Shell recently constructed in Southwest LA. The new liquefaction plant at the terminal converts just over 15 million tons per year, covering most of Central Europe’s needs.
If NATO plans to intervene at all in the Russian invasion of Ukraine, German and Central European cooperation is critical. Americans themselves remained wary of getting involved, even as this invasion broke out last week; hence President Biden’s promise not to send U.S. Army units into Ukraine. Without a greater NATO commitment to intervene, Ukraine will be lost. The 5,000 members of the 82nd Airborne Division to Poland and 1000 members of the Second Cavalry Regiment that President Biden had deployed to Poland did nothing to deter Putin from sending 175,000 troops over the Ukrainian border. Nor did any threatened or implemented economic sanctions targeted at the Russian oligarchy and their family members.
The only thing that gave parliamentarians in the Russian Duma any degree of pause, as they rubber-stamped Putin’s desire to invade, was the fact that Europe could now say no to Putin’s oil – and particularly natural gas exports – thanks to natural gas drilled from U.S. shale and shipped from Louisiana. Energy may be the only meaningful stratagem that Biden can play against Putin. As Daniel Yergin, vice chairman of IHS Markit and author of “The New Map: Energy, Climate, and the Clash of Nations” wrote in the Wall Street Journal two weeks ago, “At the 2013 St. Petersburg International Economic Forum, Vladimir Putin was on stage with German Chancellor Angela Merkel in front of several thousand people. I asked Mr. Putin how Russia planned to diversify its economy from its dependence on oil and gas export revenues. In the course of asking my question, I mentioned the word ‘shale.’ Before I finished, Mr. Putin reacted sharply, denouncing shale gas as a grave threat that should be stopped. Reflecting afterward, I realized he had two strong reasons to oppose U.S. shale gas. First, it would compete with Russian gas in Europe. Second, shale gas and oil would enhance America’s global strategic position. Given how events are unfolding in Europe today, one would have to say he was prescient.”
The Russian Ruble fell to a 45-year low in the wake of the invasion.
This article originally published in the February 28, 2022 print edition of The Louisiana Weekly newspaper.