LNG fever: European firms sign mega-contracts as US shale gas imports boom

Edward Donnelly

It is night in West Texas and flares are burning as far as the eye can see. From Big Spring to Balmorhea and on to south-eastern New Mexico, more than 4,500 fracking wells carpet the world’s most productive petroleum province and a major source of shale gas. Drilling is rampant in the Permian Basin, a region more than five times the size of the Netherlands, which produces 22% of US natural gas for domestic and international markets.

In Midland, the region’s largest city, everything speaks of the extraction boom: white pickup trucks, typical petroleum and gas worker vehicles, chug back and forth and an electronic bank sign displays the latest domestic natural gas price.

A growing volume of US shale gas is exported in the form of liquefied natural gas (LNG), with Europe the top destination. Most of this LNG begins as shale gas extracted in the fracking areas of Texas and Louisiana. It is then piped to export terminals on the Gulf of Mexico where it is liquefied to -162 degrees Celsius and shipped overseas.

Since LNG exports were authorised by the Obama administration in 2016, more than 4,000 cargoes have shipped around 370 billion cubic metres (bcm) to 42 countries. Seven large-scale export terminals are now in operation, and more than a dozen are planned in the coming decade.

This expanding domestic industry is increasingly linked to European buyers – and finance. A new analysis by Investigate Europe reveals that European companies have signed at least 33 sale and purchase agreements for US LNG since 2011, with 15 agreed since 2021, including 10 last year. The contracts, most of which are for 20 years, involve a host of private firms as well as financing from several European public authorities.

Edward Donnelly
The city of Midland in Texas is heavily reliant on the gas industry.

The US is now something of a haven for European fracking interests after most EU nations banned the controversial practice amid environmental concerns. A 500km drive east of Midland lies ‘French Land’. Arlington is the drilling epicentre of Total Energies, known through its subsidiary, TEEP Barnett. The firm, which operates more than 2,800 wells and 200,000 mining leases mostly for the US market, says it is “committed to safety” and is “excited” to be in the region. 

Resident Ranjana Bhandari, however, says the French energy giant is ‘the worst’ of all drillers locally. A gas compressor station sits behind shops and a medical clinic, and fracking wells sit behind schools and homes. One of the 31 wells in Arlington owned by Total has been nicknamed ‘Rocking Horse’, located less than 100 metres from a nursery school of the same name.  A recent study by Yale University found that children living within two kilometres of fracking sites in Pennsylvania were at a two to three times elevated risk of a major form of childhood leukemia.

When asked about environmental and safety concerns, a Total spokesperson said that the company “has a strong track record of safe and clean operations in Arlington and we take pride in being an industry pioneer when it comes to safety and innovation to continuously improve our environmental footprint and comply with all local and state requirements of our business.”

Edward Donnelly
A Total Energies sign in Arlington, Texas.

Bhandari, founder of the Liveable Arlington association, is not reassured: “In 2018, 2020 and again in 2021 all their new requests in Arlington were to drill near daycares. I wonder if they also think about how all their fracking here will impact the community, our youngest children.” The city council recently approved Total’s extraction of six new wells without holding a public hearing on the permits.

Booming European imports

Such fears appear of little concern to Europe, though. Skyrocketing demand led Europe to overtake Asia as the main import market for US LNG in 2021. By January 2022, 44% of LNG reaching Europe came from the US. Shortages of natural gas, exacerbated by reduced Russian pipeline deliveries, led to a spike of purchases on the LNG “spot market” during the winter of 2021-2022. These cargoes come at a hefty cost compared to pipeline gas and became a major contributor to energy-driven inflation in the EU.

Following Russia’s invasion of Ukraine, the European Commission and the US announced on 25 March the Energy Security Task Force, endorsing “additional liquefied natural gas (LNG) volumes for the EU market of at least 15bcm in 2022, with increases expected in the future.” Between 1 March and 31 October last year, EU imports of US LNG rose by 148% compared to the same period last year.

France has emerged as the new global leader of US LNG imports, with 11.3bcm imported on 129 cargoes in the eight-month period. This included the Dunkirk-bound Yiannis, which was the first LNG tanker to depart the Venture Global Calcasieu Pass terminal in Louisiana on 1 March.

“At night, my property here is lit up like Las Vegas,” says resident John Allaire, whose 300-plus acres of coastal land lie directly next to the terminal. Literally, I’m able to read a book out here some nights when they’re flaring at night.” Since March, ships have left the Calcasieu terminal for European destinations in Italy, Spain, Greece, Croatia, Poland, the UK, the Netherlands, and most-recently Germany.

Edward Donnelly
John Allaire’s property in Louisiana lies directly next to an LNG terminal.

In Brownsville, Texas, France’s footprint is clearer still. Funded in part by Paris-based Société Générale, the Rio Grande LNG terminal project aims to liquefy and export natural gas from the Permian Basin and Eagle Ford Shale. In May, parent company Next Decade secured a 15-year supply and purchase contract from French gas giant Engie for 1.75 million tonnes per year. The French government, a 23.6% shareholder in Engie, had intervened in 2020 to block a similar deal with Rio Grande LNG, with environmental concerns a driving reason. BNP Paribas pulled out as a funder in 2018 following a public outcry about environmental concerns.

An explosion at the Freeport LNG terminal in Texas in June, which caused a 450-foot fireball and the plant’s temporary closure, raised safety concerns. Local campaigners fear the terminal could damage the surrounding coastal ecosystem and worry about the emergency mitigation and response plans in place.

Bill Berg, a member of the Save RVG group, says “the idea we should invest in 30 years of LNG is absolutely nuts.” He adds: “The problem with building new infrastructure… it’s not only going to industrialise the port, they’re also going to build 130 miles of pipeline.”

France steadfastly upholds its 2011 domestic fracking ban, which was again defended last October by the energy transition minister Agnès Pannier-Runacher. In response to former president Nicolas Sarkozy’s support for fracking research, Pannier-Runacher said: “I don’t share his opinion at all because gas is fossil fuel which contributes to global warming.”

Such statements have not been made in terms of imported fracking products. Pannier-Runacher was previously recused of ministerial decisions concerning Engie, given that her ex-husband is the president of Engie Global Markets. President Emmanuel Macron has also remained silent on the matter of France’s leading fracking imports. The French government did not respond to requests for comment by the time of publication.

An Engie spokesperson told IE: “The signing of this contract, whose operations are expected to start in 2026, is the result of long-standing discussions with NextDecade, particularly in terms of social and environmental performance. NextDecade notably plans to reduce greenhouse gas emissions by 90% at the liquefaction terminal by developing a carbon capture and storage project.”

Europe eager for LNG contracts

LNG was once a source of tension in Brussels, with member states such as Poland and Lithuania pushing for new gas suppliers. Others, including Germany, doubled down on Russian pipeline imports by endorsing the Nordstream 2 pipeline. The Energy Security Strategy of 2014 led to the funding of LNG import terminals in Poland, Cyprus, Greece and Lithuania, with Poland’s Świnoujście terminal alone receiving €332 million in EU grants.

As many member states banned fracking domestically amid environmental and geological concerns, European companies secured the first LNG import contracts for US shale gas.

Cheniere Energy’s Sabine Pass LNG export facility in Louisiana inked its earliest deals with Gas Natural SDG in 2011 and Total in 2014. Spanish companies Endesa, Iberdrola, Gas Natural Fenosa (Naturgy), France’s EDF and Portugal’s EDP Energias signed most of the first 20-year sale and purchase agreements for Cheniere’s Corpus Christi terminal in 2014. The US’s largest LNG exporter and a publicly traded company, Cheniere is underwritten by the likes of Vanguard, BlackRock and Fidelity.

Edward Donnelly
Cheniere’s liquefaction facility in the Corpus Christi Bay in Texas.

The sector received a further boost under the Trump administration, with US companies lobbying heavily to enter the EU market. A 2018 EU-US trade deal strengthened the budding cooperation. A European Commission document said the deal aimed to develop “key missing infrastructure and investment in Europe to improve access to LNG… to make the US the leading supplier of gas to Europe.” That same year, Poland’s PGNiG signed three supply and purchase contracts for US LNG.

Another wave of LNG contracts has followed. French, Norwegian, German, Swiss and Dutch companies have all agreed purchase agreements since 2020, virtually doubling the amount of previous commitments. Most contracts start in the mid-2020s and would run into the 2040s.

Additional export capacity could solidify the US’s new role as the second largest importer of natural gas in Europe. LNG now constitutes upwards of 43% of EU natural gas supply, with about half coming from the US. Russian pipeline deliveries, once accounting for more than 40% of European natural gas imports, now make up less than 10%.

Germany fast tracks LNG projects

For the first time, the EU’s largest natural gas consumer is turning to LNG. On 19 May last year, the Bundestag approved a law authorising German government co-financing for the Brunsbüttel import terminal. The terminal is to be operated by RWE and Dutch company Gasunie. The LNG Fast Track Law also endorsed the construction of additional floating import terminals in the north of Germany, including the co-financing of a Uniper terminal in Wilhelmshaven.

A series of supply contracts for US LNG soon followed. In June, EnBW signed a 1.5 million tonne per year agreement with Venture Global for exports from two new terminals planned for Louisiana. In October, the agreement was increased to 2 million tonnes per year. An EnBW spokesperson told IE: “Liquefied natural gas plays a key role in the diversification of our fuels for electricity and heat generation: It opens up the possibility of new sources to secure Germany’s gas supply in the current energy transition phase and builds a bridge to a green energy supply.” The 20-year deal lasts from 2026 to 2045, the German government’s planned date for carbon neutrality.

A supply contract by Uniper for “responsibly sourced natural gas” and a “Qatari deal” which would import LNG cargoes from the Golden Pass Terminal in Texas add to the German rush for US shale gas. Germany’s latest LNG contracts came in December, when UK firm Ineos announced a 20-year 1.4 million tonne per year LNG supply contract from Port Arthur in Texas to supply the new Brunsbüttel terminal. RWE finalised their own 15 year contract for 2.25 million tonnes per year from Port Arthur. RWE did not respond to requests for comment at the time of publication.

Elida Castillo, a Corpus Christi area resident who works for environmental group Chispa Texas, traveled to Germany in the summers of 2021 and 2022 to join protests against the projects. “At the time they were fighting against three proposed import terminals and now this year they are fighting against about 12 import terminals,” says Castillo. “Just seeing the changing amount of import terminals and how Germany is fast-tracking these projects was also alarming.”

Edward Donnelly
Campaigners in Hamburg protest against the LNG industry.

With the arrival of the Maria Energy on the morning of 3 January, Germany welcomed its first tanker of US LNG from Calcasieu Pass in Louisiana. It was the first major tanker to offload LNG at the new floating terminal in Wilhelmshaven operated by Uniper, recently bought-out by the German government following bankruptcy.

“This first LNG delivery confirms our worst expectations: Uniper is welcoming fracking gas from one of the environmentally most hazardous terminals in the US,” says Constantin Zerger, head of energy and climate at the German environmental group DUH. “This is a serious threat for environmental and climate targets on both sides of the Atlantic.”

Fugitive Emissions

Fracking is occurring on an unprecedented scale in the US, which extracted a record 850bcm of shale gas in 2021. The LNG boom continued to drive this upward trend in 2022, particularly in Texas. The absence of stricter regulations for methane emissions as well as sparse enforcement of existing rules have alarmed critics. Analysis from Nasa and the European Space Agency point to numerous incidents of methane leakage by several “super emitters” in the Permian Basin. These “fugitive emissions” could negate the comparative advantage of burning natural gas over coal, which emits up to 50% of carbon dioxide during combustion for the same electrical output.

Industry representatives cite improving technology and stricter monitoring as ways to reduce the impact of methane leakage along the supply chain. An Engie spokesperson told IE that GHG emission levels can vary depending on producer and the transport and treatment infrastructures in place.

“US suppliers offer a high level of transparency on production/operation data compared to other markets,” the spokesperson added. “Access to this data is the essential basis for the continuous improvement approach in which we are working with our American partners.”

An EnBW spokesperson added: “We oblige our direct business partners and also Venture Global to comply with human rights and environmental standards in accordance with these principles of conduct by means of a CSR [corporate social responsibility] clause in the contract.”

Edward Donnelly
Signs in Harlington, Texas alert locals of the nearby gas pipeline.

The US and EU defended the environmental viability of the fracking to LNG supply chain at Cop27 in Egypt in November, adding that they would “step up their efforts” to reduce related methane emissions.

A spokesperson for the German government reiterated their commitment to reducing methane emissions, referencing its membership of the Global Methane Pledge, a Cop26 agreement led by the US and EU to reduce 2020 emission levels 30% by 2030. The spokesperson recognised that LNG production can “contribute to global warming” but said there was a need to increase gas supplies during the winter.

“The German government is currently making every effort to ensure security of supply for the coming winter, especially for natural gas,” the statement added. “This includes, in particular, additional LNG supplies from various supplier countries.”

In southwest Louisiana, the export boom to Europe and beyond continues apace. Here, the Sabine Pass, Cameron and Calcasieu Pass export terminals constitute half of the country’s LNG exports. Three more export terminals are also planned in the disaster-prone region, along with Port Arthur LNG and Golden Pass LNG terminals directly across the border with Texas. The coastal zone has faced four major hurricanes in the past two decades, and rising sea levels are contributing to significant coastal land loss in the state.

For James Hiatt, a former refinery worker from Lake Charles who now advocates for environmental quality in the region, the fracking and LNG process is “no better than coal”. “This thought that LNG is some kind of bridge fuel, or it’s a bridge to a transition, it’s more lies about locking us into this fossil dependence that has caused this climate catastrophe already,” he says.

Edward Donnelly is a US freelance journalist living and working in Europe. He writes on energy and climate issues across Europe and North America. In 2019 he was nominated for the Franco-German Journalism Prize for his multimedia project, Paris to Katowice: Journey Across the Coal Lands. 

Editor: Chris Matthews
Graphs: Marta Portocarrero