(Bloomberg) — Investments in liquefied natural gas — already booming as Europe seeks to cut its energy dependence on Russia — are set to get another boost, even amid longstanding climate concerns.
Leaders from the Group of Seven, representing the world’s richest economies, on Tuesday supported temporary public investments in gas projects to help navigate an unprecedented energy crisis that’s contributing to inflation and leading to more coal use in power generation.
In a statement following their summit in the Bavarian Alps, the leaders stressed “the important role increased deliveries of LNG can play” and acknowledged that “investment in this sector is necessary in response to the current crisis.”
In Europe, where LNG projects have often faced opposition on environmental grounds, the support for more LNG financing marks a political U-turn. Governments now are backing some projects for the super-chilled fuel, after Russia’s invasion of Ukraine sent prices soaring to record levels and forced nations to seek alternative suppliers.
More than 20 European LNG projects have been announced or accelerated since March, with the potential to replace about 80% of total imports from Russia in 2021, according to FTI Consulting.
Just a few years ago, gas was losing its appeal for rich nations as they intensified efforts to meet environmental obligations. As recently as December, Germany was struggling to get its LNG import terminal up and running. The nation is Europe’s biggest gas consumer.
“We observe that the interest of investors in LNG infrastructure has increased significantly since the beginning of the war,” said Timm Kehler, chairman at Germany’s gas industry lobby group Zukunft Gas.
To be sure, the G-7 leaders said they still want gas projects to be consistent with international climate objectives. The LNG-import projects that have mushroomed across Germany all have announced options to handle climate-friendly hydrogen and green fuels in the future.
Read: How Germany’s LNG Terminals Will Morph Into Green Hydrogen Hubs
LNG projects are hugely expensive. Financing is needed for the construction of multibillion-dollar production plants from the US to Qatar, as well as for new facilities to receive the fuel in Europe.
Since May, two production plants in the US have reached final investment decisions, a crucial step needed to move forward. Others are likely to follow. Global energy companies, including Exxon Mobil Corp. and Eni SpA, have signed up to help Qatar develop its massive $29 billion gas-export project.
In the financial sector, the tide is turning in favor of gas projects. The European Bank for Reconstruction & Development, whose main business is financing renewables, is now comfortable supporting gas, whether it’s a storage facility, an LNG terminal in the Baltics or an interconnector network, Harry Boyd-Carpenter, managing director for green economy and climate action at the bank, said earlier this month.
While the EBRD won’t finance gas exploration and production, projects that speed the switch from more polluting fuels like coal and oil are no longer off limits, he said.
The European Investment Bank, the lending arm of the European Union that has focused on energy efficiency and low-carbon supplies, is taking a fresh look.
The EIB “has always been very reluctant to finance LNG terminals, but we are aware we can no longer afford to take this strict stance,” Werner Hoyer, the bank’s president, said last week. “We need to be more flexible on this, but always under the condition that we fund infrastructure that can also be used to receive, distribute and use hydrogen.”
However, the bank’s spokesman said Tuesday that LNG projects currently aren’t eligible for EIB support.
In Germany, state-owned KfW Group, which is focused on clean-energy investment, is financing LNG projects in line with the government’s plan to fast-track import terminals. The bank plans to help German utility RWE AG build a terminal in the northern port city of Brunsbuettel.
(Updates with details, comments from German lobby group starting in sixth paragraph.)