During its March 2014 meeting, the European Council, composed of the governments of the member states of the European Union (EU), took unprecedented steps to expedite its energy agenda in an apparent response to the ongoing crisis in Ukraine. The Council announced that concrete plans would be set in motion as early as October, including proposals for international pipeline systems.
The EU imports 30 percent of its natural gas from Russia. Although it is unclear whether Russia will limit the natural gas it supplies to the EU, the severity of the crisis and the insecure climate it is creating are causing the EU to quickly rethink its energy security policy by reducing its dependence on Russian gas. Options for EU leaders include developing their own energy resources and infrastructure, particularly natural gas pipelines to both circumvent Russia and interconnect member states, and importing liquefied natural gas (LNG) from the United States and other countries.
As a result, analysts expect major gas production, transmission, supply and infrastructure projects in the near future, all backed by the EU.
This comes after EU energy policy had languished for quite some time. Pushes for reform had been made, primarily by the European Commission (the EU’s executive arm and main institution), but no impetus for real change occurred until now.
Opportunity exists in the near term to take part in the EU’s efforts to increase production of its own natural gas and further develop its international natural gas transmission infrastructure. The first steps will likely be building up new oil and natural gas transmission facilities among member states, creating a demand for such facilities and opening the door for U.S. companies to participate in the European market in a variety of capacities. Increased development of European resources, particularly shale gas, will also create a demand by governments and corporations in Europe for U.S. expertise and guidance in this sector.
In the United States, the long-term policy has shifted toward exportation of oil and natural gas, and permits issued for the construction of LNG facilities currently project the United States as the world’s second-largest natural gas exporter by late 2015. LNG is an undeniably important play in the natural gas industry’s future, and Europe has expressed keen interest in importing U.S. gas to reduce its dependence on Russia. As a result, now is the time to explore involvement in this area as well.
McGuireWoods professionals in the United States and Europe have the knowledge, experience and connections to advise and assist with participation in these endeavors, and would be happy to discuss the potential for your company to take part in the ongoing European energy development.
McGuireWoods’ cross-discipline, cross-practice energy industry team brings together legal, policy, energy technology and business experience to meet the challenges our clients face.
The Council’s conclusions may be downloaded here.