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2018-07-30 13:45:00

U.S. LNG FOR EUROPE

U.S. LNG FOR EUROPE

NYT - When President Trump met with Jean-Claude Juncker, the president of the European Commission, at the White House, the two said they were entering a new phase in their relationship. Crucial to that will be natural gas.

Demand for natural gas — a cleaner-burning fossil fuel than coal or oil — is rising worldwide, and the United States is a growing supplier of liquefied natural gas, or L.N.G. The European Union, meanwhile, wants to diversify its energy supply, which remains somewhat dependent on Russia, with which it has a difficult relationship.

Mr. Trump said on Wednesday that the 28-nation European Union would be "a massive buyer of L.N.G.," before adding, "We have plenty of it."

Any such shift won't happen overnight, though.

Europe needs more gas

In simple terms: Europe's consumption of natural gas is increasing, and its domestic production is falling. Its imports have risen rapidly in recent years, and will most likely increase further in the future.

"The question is: Where will these increased imports come from?" said Marco Alverà, chief executive of SNAM, an Italian natural gas infrastructure company.

Many of the region's power plants are switching from being fired by coal, which has high levels of carbon emissions, to running on gas, which is significantly better for the environment (though not entirely clean).

But gas production in Europe is declining. One major reason is that the Dutch government ordered a sharp reduction of output at the enormous Groningen field, because of earthquakes caused by exploration there.

And some other sources may be near maximum capacity. Pipeline gas, the main source of Europe's gas imports, might have peaked, especially from sources like North Africa, analysts say.

L.N.G., a chilled form of natural gas sold by the United States that can be transported on ships to any place with a specific type of terminal, offers another option. Europe already has several such terminals in place — in fact, it is using less than half their available capacity.

Buying gas from the U.S. has its advantages

To start, just having the possibility of importing large amounts of L.N.G. from the United States, or indeed elsewhere, eases the risk that Russia could apply a gas chokehold on Europe. (Germany, for example, imports around half of its natural gas from Russia.) Poland and Lithuania, which are especially wary of Moscow, have recently built L.N.G. receiving terminals for this reason.

Still, Europe's dependence on Russia is driven largely by one factor — Russian gas is cheap.

European gas prices are now largely determined by trading on financial markets, but they are often too low for American suppliers to compete. The cost of liquefying gas in the United States and transporting it to Europe doubles its price for American companies. So if they were to sell to customers in Europe at current prices, they would lose money.

By contrast, Russian gas sent by pipeline to Germany costs far less, allowing Russian companies to make large profits, according to Jonathan Stern, founder of the natural gas program at the Oxford Institute for Energy Studies.

There is also another benefit: Buying more gas from the United States could give Mr. Trump a reason to hold off on imposing costly tariffs on auto imports. Giles Farrer, an analyst at the energy consultancy Wood Mackenzie, points out that the president has tried to use gas to improve the United States' trade balance in talks with Europe and China.

So what's stopping Europe?

Cost is a major factor.

Europe has pushed hard in the past two decades to create a freely traded market for natural gas, according to Mr. Alverà of SNAM. The region has, in essence, bet that a functioning market is the best route to easing dependence on any one source.

While American gas exports have grown rapidly, most shipments have gone to Asia and Latin America, where prices have been higher. Price differences mean American gas is usually attractive to European buyers only during cold snaps, when prices on the Continent rise. If a glut of L.N.G. emerges in the future, more of that gas from the United States may wind up in Europe, but that could mean American suppliers lose money, Mr. Stern said.

Capacity is another issue

The United States became a natural gas exporter only recently, as large quantities of the fuel have become available from shale drilling. As a result, the country has yet to construct the export terminals necessary to sell its gas to customers further afield. The United States is expected to add substantially to this export capacity in the next few years, though.

"It makes a lot of sense for U.S. L.N.G. to fill the gap," said Oswald Clint, an analyst at Bernstein Research.

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Earlier:

 

 W.Europe
2018, July, 25, 10:15:00

ABSURD U.S. SANCTIONS

PLATTS - "I have not seen this bill, we need to study it from a legal point of view, but based on what the media has written about it, this is, in my opinion an absurd bill that offsets all market rules," Novak told journalists, Prime reported.

 W.Europe
2018, July, 25, 09:55:00

EUROPE WITHOUT U.S.

REUTERS - Two thirds said they supported the construction of the Nord Stream 2 Baltic Sea pipeline because it would help provide Germany with a more reliable supply of natural gas.

 

 W.Europe
2018, July, 23, 13:45:00

ВОССТАНОВЛЕНИЕ БАЛАНСА ИНТЕРЕСОВ

МИНЭНЕРГО РОССИИ - «Ключевым вопросом предложения взаимодействия для российской стороны является урегулирование вопросов, которые сегодня находятся в Арбитражном суде. Должен быть восстановлен баланс интересов, чтобы взаимоотношения продолжались после 2020 года», - сказал Александр Новак.

 W.Europe
2018, July, 12, 10:40:00

U.S. WANTS GERMANY'S MONEY

REUTERS - The Republican president, in Brussels for the NATO summit, took a swipe at Germany for supporting a new pipeline for Russian gas, saying at a pre-summit meeting: “We’re supposed to be guarding against Russia and Germany goes out and pays billions and billions of dollars a year to Russia.”

 

 W.Europe
2018, July, 4, 12:15:00

NORD STREAM 2 FINANCING

REUTERS - “The project will definitely be financed. It is important for Gazprom and Russia currently has a high liquidity in euros,” Paul Corcoran, the Nord Stream 2 CFO, told Welt am Sonntag in an interview.

 

 W.Europe
2018, July, 2, 11:55:00

NORD STREAM-2: NO SANCTIONS

REUTERS - Germany has been assured by the United States that any sanctions imposed on Russia will not affect the building of a gas pipeline to bring Russian gas to Europe, a spokeswoman for the German economy ministry said on Friday.

 W.Europe
2018, June, 27, 10:55:00

U.S. - NORD STREAM SANCTIONS

OGJ - Sandra Oudkirk, deputy assistant secretary for energy diplomacy at the US Department of State, confirmed that the Trump administration has received several requests to sanction the proposed Gazprom-sponsored pipeline that would extend from Russia beneath the Baltic Sea to Germany.

Tags: USA, RUSSIA, EUROPE, GAS, LNG