Oil and gas companies have been handed lucrative long-term energy deals with the European Union, according to a new report. It comes after Russia invaded Ukraine a year ago today, causing wholesale gas prices to spiral out of control, hitting record highs that filtered through to millions of consumers as their energy bills soared. As the war dragged on and an energy crisis unravelled, the EU scrambled to wean itself off Russian gas, which accounted for 40 percent of the bloc’s supplies in 2021.
According to research by Friends of the Earth, Public Citizen and BailoutWatch, fossil fuel companies in the US have taken advantage of the energy crisis over the past year, by offering a replacement for a short-term Russian supply crunch with long-term gas deals.
Since the start of the war, these companies have signed 45 long-term contracts with the bloc, a significant rise from the 14 deals signed the previous year, and more than double the previous two years combined.
For most of these new contracts, the authors of the report noted that the gas won’t be delivered until after 2026, and will continue for 20 years or more.
Meanwhile, gas prices have finally started to dip. With the gas benchmarking peaking at more than €300/MWh (£266.92) in August 2022, this month it dipped below €50 (£44.51) per megawatt hour down to €48.90/MWh (£43.51) for the first time in nearly 18 months.
Lukas Ross, a co-author of the report and program manager for Friends of the Earth told the Guardian: “LNG terminals are massively expensive, multi-decade investments.
“In order for a bank or other investor to feel comfortable writing a check for something like this, they need market certainty. And the way that certainty is delivered is through long-term contracts. But a short-term supply crunch should not be solved with long-term infrastructure.”
In the report, the authors accused oil and gas companies of “exploiting the Russian invasion of Ukraine to justify contracts that commit the United States to keep exporting LNG into the 2040s.
“These long-term supply contracts, which have proliferated in the year since the Russian invasion, make it possible to build new export terminals by guaranteeing annual delivery of millions of tons of gas for 20 years or more to overseas consumers.”
Meanwhile, in a bid to boost gas exports, the US government fast-tracked the permitting process for a number of proposed LNG terminals, many of which had their applications stalled for years.
While these energy companies claimed that these terminals would provide critical LNG supplies to keep the lights on in Europe, the report rebuked that statement, describing them as “misleading”.
They wrote: “More than three-fourths of LNG set to be delivered under these contracts is destined for the Asia-Pacific region or Big Oil companies and commodity trading firms making speculative bets.
Alan Zibel, research director for Public Citizen said: “There’s somewhat of a bait-and-switch going on here. The public have been told that these terminals and these exports are to help Europe, but in reality, the bulk of the contracting volume is still going to Asia.”
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Meanwhile, the energy crisis has continued for Europe, with the continent being warned that its “energy war” with Russia is not over, despite many countries managing to replace large volumes of Russian gas this winter.
The EU was told by Fatih Birol, head of the International Energy Agency, that it could still face a “risky” situation in winter 2023 as the bloc continues to adjust to life with lower volumes of Russian gas after the Kremlin’s weaponisation of supplies.
He told the Financial Times: “Russia played the energy card and it did not win… but it would be too strong to say that Europe has won the energy battle already.”
The energy boss added that Europe cannot afford to lose focus and urged it to keep developing renewable energy sources as this will be the “lasting solution to energy security should be based on clean energy”.
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