Landmark step for transatlantic energy security

Today’s announcement that leading Polish utility Polish Oil and Gas Company (PGNiG) will sign its second long-term take-or-pay contract with a US company in just a month is significant news for transatlantic energy security, global climate security and the viability of the U.S. liquefied natural gas (LNG) model.

Since the advent of the U.S. shale boom, many Europeans (especially in the East, where dependence on piped gas has been a relentless source of insecurity) have demanded access to U.S. LNG to deter Russia from monopoly pricing and to diversify their gas supply away from their manipulative neighbor.{mosads}

These recent decisions are helping to make these countries’ stated goals a reality. New LNG terminals in Lithuania and Poland (and anticipated terminals in Croatia and Germany), will provide multiple gateways for the nations of Eastern Europe to access global supplies of natural gas for heat and power.  Long-standing aspirations of these nations to shed their dependence on Russia are becoming a reality. Poland, for its part, is moving decisively. Russia’s existing supply contracts with Poland expire in 2022.

Today’s announcement by PGNiG of Sempra Energy’s 2.5 Bcf/d 20 year contract, following supply deals with Cheniere earlier in November and with Venture Global in October 2018, will significantly diversify Poland’s gas supply from its nearly 66 percent dependence on Gazprom. Poland is currently under contract to take 10 bcm/year of gas from Gazprom; its signed LNG contracts in 2018 ultimately will replace nearly 75 pecent of that volume already.

PGNiG’s contracts represent powerful commitments to transatlantic energy security. Bolstered by strong advocacy from the Trump administration, Poland has made a long-term bet on the security of US gas exports as it weans itself away from Russia.

Following on the heels of Poland’s hosting of COP 24 in Katowice this month, Poland’s purchase of U.S. LNG is also a boon for climate security. New LNG imports are a symbol of how countries with high dependency on coal are taking affordable steps towards reducing their carbon footprint.

While Poland still relies on coal-fired generation, its new LNG terminal opens the door to expanding infrastructure which can deliver natural gas for heat and power to the rest of the country. 

Finally, after a long pause in new long-term contracts for LNG following the oil price crash, and subsequent bargain-basement prices for spot market LNG, these two agreements show that consumer country demand for long-term energy security has returned and the U.S. model of hub based pricing, and flexible resale free of destination clauses, is competing effectively with other overseas suppliers. 

As tensions with Russia continue to rise, and the administration and Congress are challenged to take steps that impose meaningful consequences on Russia, commercial progress from European utilities choosing reliable cost-competitive suppliers of energy is a meaningful step which benefits both Europeans and Americans.

The work of fully integrating the European gas market, creating a European Energy Union and expanding interconnections between Eastern European nations lies ahead.  But today, the facts on the ground are changing – and that is a reason to celebrate.

David L. Goldwyn is Chairman of the Atlantic Council Energy Advisory Group and former Special Envoy for International Energy under President Obama.