Rishi Sunak to strike gas deal with US to ease energy crisis

Archbishop Jerome Lloyd OSJVPosted by

PM to announce ‘partnership’ to ship liquefied natural gas to allay blackout fears

Rishi Sunak to strike gas deal with US to ease energy crisis
Rishi Sunak, pictured speaking at Cop27 on Monday, is set to agree a new energy partnership with the US
Rishi Sunak, pictured speaking at Cop27 on Monday, is set to agree a new energy partnership with the US CREDIT: Sean Gallup/Getty Images

Rishi Sunak is poised to announce a major gas deal with America after the Cop27 climate change summit, The Telegraph can disclose.

Talks about the “energy security partnership” are in their final stages, with the US planning to sell billions of cubic metres of liquefied natural gas to Britain over the coming year.

It comes after the war in Ukraine exacerbated energy shortages, prompting warnings of blackouts this winter.

Details of the deal can be disclosed after the Prime Minister used a visit to Cop27 in Egypt to urge world leaders to “honour” their promises to tackle climate change.

The UK’s willingness to import more fossil fuels while urging action to tackle climate change is likely to be attacked by Labour, but is now seen as essential to ensure the country’s energy security. 

The deal will likely be welcomed by senior Tories, who have raised concerns that the drive for net zero has been prioritised over mounting energy bills for households and the taxpayer.

Britain has been in advanced negotiations with countries around the world to solve the energy crisis fuelled by Russia’s invasion of Ukraine in the spring.

The Telegraph has spoken to half a dozen current and former government figures who are familiar with talks over the US-UK energy deal.

It is understood that Liz Truss, the former prime minister, and Joe Biden, the US president, had personally discussed details of the agreement.

Downing Street insiders had hoped to announce the package on Friday, Oct 21, but that plan was scrapped as Ms Truss gave in to Tory pressure the day beforehand and resigned.

The deal has continued to be pursued by UK officials in Washington DC under Mr Sunak, with an announcement expected in the next week or two, although a date is yet to be decided.

While the specifics of the deal are not yet fully signed off, the package’s basic structure has remained consistent under both Ms Truss and Mr Sunak, according to those involved.

The US is set to promise to export billions of cubic metres of liquefied natural gas to the UK, sources have told this newspaper.

The UK side hopes the figure will be around 10 billion cubic metres, according to two UK sources. The whole of the European Union was promised 15 billion cubic metres by the US this spring.

But wrangling about the exact figure continues and it remains possible that a specific number will not be named in the public declaration.

The agreement will be hailed by London as proof that the UK is moving away from Russian-linked oil and gas imports in the wake of the Ukraine invasion.

It would also provide reassurance on UK energy supply. The National Grid has warned of blackouts this winter between 4pm and 7pm on very cold days if there are European supply problems.

It is unclear how much of the gas – which will be sold by US companies, rather than the US government – will be in the UK energy system for this winter.

A Whitehall source said the way the deal was currently constructed would see the gas provided “over the next year”. Much will depend on the specific terms agreed with private companies.

London has more freedom to strike bilateral energy deals with countries since leaving the EU at the start of last year.

The UK is also pursuing deals to import more liquefied natural gas from Norway and Qatar, with those agreements having the potential to dwarf the US deal in terms of volume.

Liquefied natural gas is used for cooking, generating electricity and heating homes, as well as manufacturing products such as fertilizer and medicine.

The US-UK agreement – which would be styled as a new “energy security partnership” or “initiative” – would be much wider than just gas, incorporating a drive on renewables.

A pledge to work together to develop future nuclear power projects is currently included in the deal. UK figures hope for help in developing small modular nuclear reactors.

There are also expected to be declarations of joint work to improve energy efficiency, drive down consumption and invest in future renewable technologies.

The Biden administration would be expected to play up the green technology aspect of the deal, while the UK would be keen to stress the boost to UK energy supplies.

Both Washington and London are keen to show their ability to work together in the face of Russian aggression – with Vladimir Putin, the Russian president, accused of weaponising energy exports to bring financial pain on Western nations who have opposed his Ukraine invasion.

One source involved in the talks this autumn said the deal on gas would be hailed as a “goodwill gesture” from the US to the UK.

Gas is a major part of the UK’s energy mix, used to generate about 40 per cent of its electricity and heat about 85 per cent of homes.

Soaring gas prices due to cuts in Russian gas supplies to Europe have wreaked economic havoc, with governments forced to spend billions shielding consumers from the impact.

Most of the UK’s supply comes via pipes from Norway and the UK side of the North Sea, as well as some via pipes from Belgium and the Netherlands. However, shipments of liquefied natural gas from the US and elsewhere are increasingly important.

About 17 per cent of the UK’s gas came in the form of liquefied natural gas in 2021, mostly from Qatar, the US and Russia. Russian imports have dropped this year following its war on Ukraine, but more supplies have been coming including from the US and Peru.

On Monday, Mr Sunak told world leaders at Cop27 that the energy crisis meant the world should move faster on net zero.

The Prime Minister said: “We can bequeath our children a greener planet, and a more prosperous future. That’s a legacy we could be proud of.”

Watch: Rishi Sunak delivers his speech at Cop27 summit in Egypt

Downing Street insisted the UK was fulfilling its responsibility on climate finance, amid a growing row at the summit over funding to countries worst hit by climate change.

The UN secretary-general told the summit that the issue of payments for the loss and damage inflicted on climate vulnerable nations could “no longer be swept under the rug”.

But Boris Johnson, the former prime minister, said that the UK could not afford to pay out “reparations” to developing countries, despite its historic role as a polluter.

“What we cannot do is make up for that in some kind of reparations. We simply do not have the financial resources. No country could,” he said during an appearance in Sharm el-Sheikh.

Gas is bought into the UK by private companies such as Centrica, the owner of British Gas, which in August signed a £7 billion deal with US-based Delfin Midstream to buy liquefied natural gas from 2026.

The merits of any new deal between the UK and the US would depend on prices as well as the flexibility, with demand in any week always uncertain and weather dependent.

Leave a Reply