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Texas Standard

What Europe’s need for natural gas means for Texas

a tall silver pipe with flames coming out of the top with a blue sky and small white clouds in the background
Gabriel C. Pérez/Texas Standard
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A gas flare at an oil well in West Texas' Permian Basin.

A sudden rise in demand could have big implications for the Permian Basin and the Gulf Coast.

From Texas Standard:

For years, some European nations have been reluctant to import natural gas from Texas because of the harmful emissions required to extract it. That’s changed in a hurry though, as the continent now faces a gas shortage.

Russell Gold, a writer and senior editor for Texas Monthly, spoke to Texas Standard about the factors behind the new demand and how it could affect communities in Texas. Listen to the interview with Gold in the audio player above or read the transcript below.

This interview has been edited lightly for clarity.

Texas Standard: What seems to be fueling this natural-gas shortage in Europe?

Russell Gold: Well, a couple things, really. There was a cold winter; Russia stopped sending as much gas through the pipelines and all of a sudden, really beginning last fall, Europe sort of began plunging into this energy crisis. At certain points last year, they were paying upwards of $30 per million British thermal units, and by comparison, we pay about $4 for that here in the United States.

So how much more natural gas are we now exporting to Europe?

The United States has about double the amount of natural gas that it's exporting through liquefied natural gas (LNG) tankers to Europe. It's not enough to make up for Russian pipelines but it's been helpful. It helped blunt the worst of the crisis in Europe.

What are you hearing from the folks in the liquefied-natural-gas industry about this new demand?

They're ecstatic. This was an industry that's been a long time coming here in the United States. Really, we started talking about it right around 2000, 2001 or so, and at the time, people were talking about, "Oh, we're running out of natural gas; we're gonna need to import into Texas." That turned around with the rise of fracking and the discovery of lots more gas, and they really just started coming online the last two to three years. At first, there was a lot of demand from Asia, and now there’s a lot of demand from Europe as well — they're really belles of the ball at this point.

I know that there are a few LNG projects that are along the Texas coast that have been on hold while investors try to figure out whether they're really worth the enormous investments. Will the sudden spike in demand change the timeline of these projects?

These are multibillion-dollar projects, and in order to finance them, there needs to be a long-term contract from a buyer. Often, what delays these is the buyers are just not quite willing to commit to 20 years of buying. And if they're not willing to commit then these projects aren't going to get built. There are a lot of projects right now along the Gulf Coast that have been proposed, from Brownsville all the way up into Alabama. Not all of them will get built, but some of them will. This new, emerging demand and recognition in Europe of Texas’ robust LNG industry is something that's really going to help.

Natural-gas extraction often comes with environmental problems. Will increased demand mean more waste and environment issues? Or does this provide a customer for some of that gas that normally would just be burned off?

One of the things that's happening is that Europe has been very vocal about their concerns with the way Texas produces its gas, and how many leaks there are in the system. And one of the fascinating questions to me is, if Europe becomes a long-term buyer, are they going to start imposing rules so that the sellers of gas here in Texas will begin cleaning up their operations?

We've already seen that happening. Cheniere [Energy], one of the biggest LNG exporters, is already beginning to offer a lot more transparency in what they're calling “emission tags.” So they're telling their buyers, this is how many emissions there are.

Right now, Europeans are buying whatever LNG they can get their hands on, but are going to turn around and say, ‘Look, if you want to continue to have our business, you're gonna have to clean up the Permian Basin." I think that's already beginning to happen, and we're already beginning to see companies like Cheniere and Freeport LNG [Development LP] paying a lot more attention to where the gas is coming from and how climate-friendly gas production is out in West Texas and South Texas.

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