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The EU's executive is firming up plans for future hydrogen
imports as Russia's war at its border forces it to take a hard look
at its gas policies and strategy.
The plans were laid out in the European Commission's (EC) 22
March
communication on security of supply and affordable energy
prices.
It came a day ahead of its proposal for a new regulation to
force member states to stockpile natural gas, following up on plans
to phase out Russian fossil fuels within both the 11 March Versailles Declaration and the
8 March REPowerEU communication.
While the regulation's focus is on gaining enough natural gas
imports for next winter, the EC said in the communication it
ultimately wants to pivot to imports of net-zero aligned renewable
hydrogen. It suggested states invest in hydrogen-compatible LNG
import capacity and hydrogen infrastructure.
It backed this up with a 25 March joint statement with the US.
The partners pledged to "undertake efforts" on the construction of
a new "clean and renewable hydrogen-ready" LNG infrastructure.
According to the statement, new LNG infrastructure is being
built to serve a natural gas supply deal that will see the EU
become a much larger consumer of US LNG supplies through 2030,
perhaps by as much as 50 billion cubic meters (bcm) per year.
The EU hopes to limit the emissions of methane caused by the LNG
new infrastructure by pledging to lower its GHG intensity,
including through electrification of processes and preventing
leakage.
Some LNG infrastructure can be retrofitted to allow imports of
hydrogen in the form of ammonia. US oil engineering firm Black
& Veatch says LNG terminals can be retrofitted to handle
imports of ammonia, a chemical that can be used as a hydrogen
"carrier" to reduce the cost of shipping liquid hydrogen.
"As the world continues to shift towards decarbonization in
chemical production, and strong market demand drives the transition
to carbon-free energies, ammonia's role in the green energy economy
continues to expand," wrote Mehran Ghasemi, a lead
process engineer with Black & Veatch's Oil & Gas
business.
Despite the rush to build new natural gas infrastructure, the EC
says it is staying the course on its policy package aiming to reach
net-zero for 2050. "Accelerating the green transition will
reduce emissions, reduce dependency on imported fossil fuels, and
protect against price hikes. However, the current geopolitical
situation requires additional short-term measures to deal with the
market imbalances for energy and for securing supplies in the years
ahead," said the EC in the gas strategy communication.
EU looks to import cheap hydrogen
Aiming to tackle surging prices for natural gas and concerns
around heating homes this winter, the EC proposes EU member states
start to collectively purchase not only natural gas but also
hydrogen.
This could be done through an EU-led task force for common gas
purchases. "By pooling demand, the task force would facilitate and
strengthen the EU's international outreach to suppliers to help
secure well-priced imports ahead of next winter," said the EC's
statement.
A team within the task force would also "[prepare] the ground
for future energy partnerships" on hydrogen. The EC also suggested
member states join in a "H2" hydrogen partnership to ensure stable
hydrogen demand in the EU as well as stable investment conditions
for infrastructure.
While the proposed EU gas strategy package in
December gave states the option of jointly buying natural gas,
the latest regulatory proposal requires that states "use all
necessary" measures to reach storage targets, for example, working
together on LNG purchases and sharing LNG.
The EU aims to domestically produce up to 1 million metric
tonnes (mt) of renewable hydrogen per year by 2024, and 10 million
mt per year by 2030 under its Hydrogen Strategy.
This target increased under the REPowerEU communication, which
aims for EU hydrogen production and imports of 20 million mt per
year by 2030 to replace 25-50 bcm per year of imported Russian
gas.
The EU is expected to import about half of the hydrogen and
hydrogen-based fuels it needs by 2050, according to a report by the UK charity World
Energy Council.
US LNG lobby wins long-term security
The US-EU LNG export deal sees the US get EU "support" for
long-term contracts for natural gas, the kind which Russian
President Vladimir Putin had
said he wanted last year.
The EU is looking to tame gas price volatility and prevent a
looming supply crunch. "We are aiming to commit additional supplies
for the next two winters," EC President Ursula von der Leyen said
in a tweet.
Under the deal laid out in the joint statement, the US
guarantees the EU 15 bcm of US LNG in 2022 at stable gas
prices.
It will supply the EU with around 14% of the amount it needs
from Russia this winter, and the EU has in exchange agreed to tap
the US for up to 50 bcm of LNG per year through 2030.
This amount would make up the vast majority of the LNG the US
currently exports and half of the natural gas that the EU needs to
replace from Russia. Currently, Asia consumes the most US LNG,
followed by Europe, according to the US Energy
Information Administration.
The joint US-EU statement also pledged to "encourage final
investment decisions on both LNG export and import
infrastructure."
In the spring of 2020 when a Saudi-Russia price war and COVID-19
pandemic lowered oil prices, LNG projects were threatened or
delayed, according to a report from non-profit Global
Energy Monitor. For example, US infrastructure company Sempra
Energy delayed a final investment decision to build the Port Arthur
LNG terminal.
But at the end of 2020, LNG demand had rebounded to record
levels particularly in Asia, according to Galia
Fazeliyanova, energy economics analyst for the international
organization Gas Exporting Countries Forum.
One US LNG association that had lobbied for the LNG deal hailed
it as victory. "The agreement's central concept—a joint EU-US
Task Force on Energy Security—is a direct response to the
proposal put forward by LNG Allies, The US LNG Association, in our
letter to President Biden on February 25 and our conversation with
EU Energy Commissioner Simson earlier in the month," said Fred
Hutchison, CEO of LNG Allies.