• 6 hours PDVSA Booted From Caribbean Terminal Over Unpaid Bills
  • 8 hours Russia Warns Ukraine Against Recovering Oil Off The Coast Of Crimea
  • 10 hours Syrian Rebels Relinquish Control Of Major Gas Field
  • 11 hours Schlumberger Warns Of Moderating Investment In North America
  • 12 hours Oil Prices Set For Weekly Loss As Profit Taking Trumps Mideast Tensions
  • 13 hours Energy Regulators Look To Guard Grid From Cyberattacks
  • 14 hours Mexico Says OPEC Has Not Approached It For Deal Extension
  • 16 hours New Video Game Targets Oil Infrastructure
  • 17 hours Shell Restarts Bonny Light Exports
  • 18 hours Russia’s Rosneft To Take Majority In Kurdish Oil Pipeline
  • 1 day Iraq Struggles To Replace Damaged Kirkuk Equipment As Output Falls
  • 1 day British Utility Companies Brace For Major Reforms
  • 1 day Montenegro A ‘Sweet Spot’ Of Untapped Oil, Gas In The Adriatic
  • 1 day Rosneft CEO: Rising U.S. Shale A Downside Risk To Oil Prices
  • 2 days Brazil Could Invite More Bids For Unsold Pre-Salt Oil Blocks
  • 2 days OPEC/Non-OPEC Seek Consensus On Deal Before Nov Summit
  • 2 days London Stock Exchange Boss Defends Push To Win Aramco IPO
  • 2 days Rosneft Signs $400M Deal With Kurdistan
  • 2 days Kinder Morgan Warns About Trans Mountain Delays
  • 2 days India, China, U.S., Complain Of Venezuelan Crude Oil Quality Issues
  • 2 days Kurdish Kirkuk-Ceyhan Crude Oil Flows Plunge To 225,000 Bpd
  • 2 days Russia, Saudis Team Up To Boost Fracking Tech
  • 3 days Conflicting News Spurs Doubt On Aramco IPO
  • 3 days Exxon Starts Production At New Refinery In Texas
  • 3 days Iraq Asks BP To Redevelop Kirkuk Oil Fields
  • 3 days Oil Prices Rise After U.S. API Reports Strong Crude Inventory Draw
  • 4 days Oil Gains Spur Growth In Canada’s Oil Cities
  • 4 days China To Take 5% Of Rosneft’s Output In New Deal
  • 4 days UAE Oil Giant Seeks Partnership For Possible IPO
  • 4 days Planting Trees Could Cut Emissions As Much As Quitting Oil
  • 4 days VW Fails To Secure Critical Commodity For EVs
  • 4 days Enbridge Pipeline Expansion Finally Approved
  • 4 days Iraqi Forces Seize Control Of North Oil Co Fields In Kirkuk
  • 4 days OPEC Oil Deal Compliance Falls To 86%
  • 4 days U.S. Oil Production To Increase in November As Rig Count Falls
  • 4 days Gazprom Neft Unhappy With OPEC-Russia Production Cut Deal
  • 5 days Disputed Venezuelan Vote Could Lead To More Sanctions, Clashes
  • 5 days EU Urges U.S. Congress To Protect Iran Nuclear Deal
  • 5 days Oil Rig Explosion In Louisiana Leaves 7 Injured, 1 Still Missing
  • 5 days Aramco Says No Plans To Shelve IPO
Alt Text

The U.S. LNG Boom Could Be About To Stall

United States LNG has seen…

Alt Text

The Natural Gas Market Is Set To Boom

With the new lower-for-longer oil…

Nick Cunningham

Nick Cunningham

Nick Cunningham is a freelance writer on oil and gas, renewable energy, climate change, energy policy and geopolitics. He is based in Pittsburgh, PA.

More Info

Can U.S. LNG Break Russia’s Gas Grip on Europe?

Can U.S. LNG Break Russia’s Gas Grip on Europe?

The spread between natural gas prices in the United States and Asia has many U.S. producers salivating at the prospect of shipping LNG overseas. Japan, the largest importer of LNG in the world by far, is seen as the biggest prize. The U.S. is not alone – LNG export terminals are under construction around the world, particularly in Australia, the Middle East, and East Africa. By 2018, LNG supplies could double to 600 million tonnes annually. In my last article I looked at why the opportunity for LNG exporters may actually be limited. In this one, I look at an alternative view, prompted by remarks made by the head of LNG trading at Conoco Phillips, as reported by Reuters.

In this version, the final destination for much of the exported U.S. gas could end up being the European market, rather than Asia. As other projects are more strategically timed and located to serve the Asian market (Australia comes to mind), U.S. exporters may not be able to service Asian buyers, at least in substantial volumes. As its competitors reach Asia first, U.S. exporters may send much of their LNG to Europe instead. If that is the case, the U.S. could steal some market share in Europe from Russia, according to Birger Balteskard of ConocoPhillips. This could have positive geopolitical benefits for the U.S. and Europe.

Related Article: Russia’s Rosneft to Build Arctic Seagoing Vessels

Russia has traditionally been the major supplier of European gas. But it charges high prices, often in the form of long-term contracts linked to the price of oil. And the overwhelming dependence on Russian gas also makes European policymakers nervous from a national security standpoint. Russia has demonstrated its willingness to cut off natural gas supplies to Europe – often in the depths of winter – to achieve some political objective. For these reasons, Europe is often seeking alternative supplies to enhance its energy security. This opens the door to U.S. LNG.

While that is certainly possible, it would still need to make economic sense. The offloading price for LNG in Europe (~$10/MMBtu) is much lower than it is in Asia (~$19/MMBTu). And U.S. natural gas is no longer going for rock bottom prices. It recently surpassed $6/MMBtu, a five-year high. That is likely a temporary phenomenon due to the cold weather, but it also suggests ultra-cheap gas may be a thing of the past. So while it may be difficult for U.S. LNG exporters to sell to Asian markets as Balteskard proposes, with such a small price differential between U.S. and European natural gas prices, it won’t be easy to sell to Europe either. And as I mentioned in the last article, opening up the U.S. to LNG trade will necessarily raise prices, further eroding America’s advantage.  Over the long-term, U.S. prices may be in the $6-$10/MMBtu range, which will make it difficult to beat Russia on price, particularly if Russia drops its prices a bit.

Related Article: Opportunity for U.S. LNG Exporters May Be Limited

Moreover, it is not as if there won’t be more gas alternatives to Europe in the coming years. Other LNG capacity expansions in the Middle East and Africa will also compete against the U.S., not to mention the Trans-Adriatic Pipeline that will carry Caspian gas to Western Europe. Taking all of this into account, I think U.S. LNG exports to Europe will move forward, but in a limited fashion.

Now the one major factor that could upend this theory is LNG demand coming from China. China has not been a major LNG buyer in the past, which is probably the reason it is often overlooked. But with terrible air pollution, China is seeking to increase its consumption of natural gas. If over the next several years China imports LNG at a faster rate than many expect, the market LNG market could be big enough to allow for a lot of newcomers. It seems that Chinese demand for LNG is set to take off – China set a record for LNG imports in January – imports hit 2.65 million metric tons, up 77% from a year earlier. By 2018, China could account for one-fifth of the 272 million ton global LNG market. This is a big unknown variable that U.S. LNG exporters will need to watch.

By Nicholas Cunningham of Oilprice.com




Back to homepage


Leave a comment
  • Amvet on March 31 2014 said:
    You say "Russia has demonstrated its willingness to cut off natural gas supplies to Europe – often in the depths of winter – to achieve some political objective" this is totally false. The Ukraine did not pay for Russian NG that they had received. Russia has kept its contracts with Europe. The USA (and naturally the UK) keeps beating the drum about European dependence on Russia.
  • ss on June 16 2014 said:
    you are right.Ukraine did not yet pay for november"13,december"13,april"14,may"14.and this mean Russian political decision?

    Can USA deliever to China LNG half year for free?????
    Author's professionalism is question.
    sorry for errors in text

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News