EU's $250 billion-per-year spending on US energy is unrealistic

By Kate Abnett and Arathy Somasekhar

BRUSSELS/HOUSTON (Reuters) -The European Union's pledge to buy $250 billion of U.S. energy supplies per year is unrealistic because it would require the redirection of most U.S. energy exports towards Europe and the EU has little control over the energy its companies import.

The U.S. and EU struck a framework trade deal on Sunday, which will impose 15% U.S. tariffs on most EU goods. The deal included a pledge for the EU to spend $250 billion annually on U.S. energy - imports of oil, liquefied natural gas and nuclear technology - for the next three years. 

Total U.S. energy exports to all buyers worldwide in 2024 amounted to $318 billion, U.S. Energy Information Administration data showed. Of that, the EU imported a combined $76 billion of U.S. petroleum, LNG and solid fuels such as coal in 2024, according to Reuters' calculations based on Eurostat data.

More than tripling those imports was unrealistic, analysts said.

Arturo Regalado, senior LNG analyst at Kpler, said the scope of the energy trade envisioned in the deal "exceeds market realities."

"U.S. oil flows would need to fully redirect towards the EU to reach the target, or the value of LNG imports from the US would need to increase sixfold," Regalado said.

There is strong competition for U.S. energy exports as other countries need the supplies - and have themselves pledged to buy more in trade deals.

Japan agreed to a "major expansion of U.S. energy exports" in its U.S. trade deal last week, the White House said in a statement. South Korea has also indicated interest in investing and purchasing fuel from an Alaskan LNG project as it seeks a trade deal.

Competition for U.S. energy could drive up benchmark U.S. oil and gas prices and encourage U.S. producers to favour exports over domestic supply. That could make fuel and power costs more expensive, which would be a political and economic headache for U.S. and EU leaders.

Neither side has detailed what was included in the energy deal - or  whether it covered items such as energy services or parts for power grids and plants.

The EU estimates its member countries' plans to expand nuclear energy would require hundreds of billions of euros in investments by 2050. Its nuclear reactor-related imports, however, totalled just 53.3 billion euros in 2024, trade data shows.

The energy pledge reflected the EU's analysis of how much U.S. energy supply it could accommodate, a senior EU official said, but that would depend on investments in U.S. oil and LNG infrastructure, European import infrastructure, and shipping capacity.

"These figures, again, are not taken out of thin air. So yes, they require investments," said the senior official, who declined to be named. "Yes, it will vary according to the energy sources. But these are figures which are reachable."

There was no public commitment to the delivery, the official added, because the EU would not buy the energy - its companies would. 

Private companies import most of Europe's oil, while a mix of private and state-run companies import gas. The European Commission can aggregate demand for LNG to negotiate better terms, but cannot force companies to buy fuel. That is a commercial decision.

"It's just unrealistic," ICIS analysts Andreas Schröder and Ajay Parmar said in written comments to Reuters. "Either Europe pays a super high non-market reflective price for U.S. LNG or it takes way too much LNG volumes, more than it can cope with." 

U.S. PRODUCTION

The United States is already the EU's top supplier of LNG and oil, shipping 44% of EU LNG needs and 15.4% of its oil in 2024, according to EU data.

Raising imports to the target would require a U.S. LNG expansion way beyond what is planned through 2030, said Jacob Mandel, research lead at Aurora Energy Research.

"You can add on capacity," Mandel said. "But if you're talking about the scale that would be necessary to meet these targets, the $250 billion, then it's not really feasible."

Europe could buy $50 billion more of U.S. LNG annually as supply increases, he said. 

REPLACING RUSSIA

The EU has said it could import more U.S. energy as its plan advances to end Russian oil and gas imports by 2028.

The EU imported around 94 million barrels of Russian oil last year - 3% of the bloc's crude purchases - and 52 billion cubic metres (bcm) of Russian LNG and gas, according to EU data. For comparison, the EU imported 45 bcm of U.S. LNG last year.

Higher EU fuel purchases would, however, run counter to forecasts for EU demand to decline as it shifts to clean energy, analysts said.

"There is no major need for the EU to import more oil from the U.S., in fact, its oil demand peaked a number of years ago," Schröder and Parmar said.

($1 = 0.8571 euro)

(Reporting by Kate Abnett in Brussels and Arathy Somasekhar in Houston; Additional reporting by Marwa Rashad and Robert Harvey in London, Julia Payne in Brussels, Curtis Williams in Houston and Timothy Gardner in Washington; Writing by Nina Chestney; Editing by Simon Webb and Matthew Lewis)