Opportunity for Netherlands as Europe Seeks Gas Alternatives

Rotterdam’s ability to gasify imported LNG could help Europe reduce its dependence on Russian energy.

The LNG tanker Arctic Voyager docks in Rotterdam, the Netherlands
The LNG tanker Arctic Voyager docks in Rotterdam, the Netherlands (Gate)

Vladimir Putin’s aggression in Ukraine has prompted European countries to rethink their dependence on Russian natural gas. The Netherlands, still Europe’s second-largest gas producer, could play a key role in diversifying the continent’s energy supply but much hinges on America’s willingness to export.

Former Russian satellite states in Eastern Europe are almost wholly dependent on Russian oil and gas. Germany, Europe’s largest economy, gets more than a third of the gas it consumes from Russia which also provides more than 30 percent of the gas that is imported by Italy.

About half of Russia’s gas exports to Europe flow through Ukraine where Western countries believe it is supporting separatist uprisings in an attempt to divide the country and weaken a government in Kiev it perceives as hostile. Russia earlier invaded and annexed the Crimean Peninsula which had been part of Ukraine since 1954.

Although the European Union has imposed sanctions on Russians who are believed to be close to Putin’s regime, its member states hesitate to sever ties with Moscow altogether. Twice in recent years has Russia turned off the gas supply to Ukraine amid price disputes, leaving parts of Central Europe literally in the cold during winter.

The Americans complain that Europe’s response to Russian aggression isn’t forceful enough yet they have so far shied away from making the decision that could give their allies more comfort: increasing natural gas exports to Europe.

Natural gas production in the United States has risen dramatically thanks to horizontal drilling and hydraulic fracturing. The country is due to overtake Russia as the world’s biggest natural gas producer this year. Gas prices in America are just a third of what they are in Europe.

Yet exports have hardly increased as a 1970s ban requires the Energy Department to approve each export proposal separately and assess whether it would be in the “national interest.”

Although it would take years to build the necessary infrastructure and sign contracts for more transatlantic gas exports, overturning the ban would not only give European countries more leeway in their dealings with Russia; it could also influence Russian decisionmaking today. Hydrocarbons account for 70 percent of the country’s exports and provide more than half of the state’s income. The prospect of a challenge to Russia’s natural gas hegemony in Europe could make it more susceptible to Western demands.

The Netherlands could play an important part in such a strategy as it hosts one of the few terminals in Western Europe that can gasify liquified natural gas delivered by tankers and send it directly into pipelines that reach Central Europe.

The Gate (“Gas Access to Europe”) terminal came online in 2011 but currently operates at approximately 10 percent capacity. It was built to preserve the Netherlands’ position as a pivotal distributor of natural gas in Europe. The country’s own supplies are running thin. The International Energy Agency predicted last week it may have to import gas in as little as ten years’ time.

Little wonder that Prime Minister Mark Rutte urged the rapid ratification of a transatlantic trade and investment partnership on Friday that could clear the way for more American energy exports. His country’s energy security depends on it.

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