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Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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Why U.S. LNG Is Going To Asia Instead Of Europe

  • Most American gas has been going to Asia, where buyers have been more generous with prices.
  • U.S. LNG has never been particularly competitive in most of Europe because of the availability of pipeline gas.
  • Asia’s insatiable appetite for energy and its willingness to pay a premium for U.S. LNG because of the lack of major pipeline supplies, it is likely to remain as the ultimate market for U.S. LNG.

U.S. shale drillers appear to be worried about losing market share in Europe to Russia, Bloomberg reported last week, citing data from a Kansas Fed survey. But this worry may be more of a hypothetical than actual problem.

“Associated gas will increase as the U.S. shale drilling ramps up in future years,” an executive from the oil and gas industry told the Kansas Fed. “European demand will be further satisfied from Russian supply, reducing the U.S. market share.”

Yet most U.S. gas exports haven’t been going to Europe at all this year. Instead, most American gas has been going to Asia, where buyers have been more generous with prices.

In September, the Financial Times reported that Asian gas buyers have been outbidding European buyers precisely for U.S. gas. 

“They have more purchasing power now,” one LNG broker told the FT, referring to Asian gas buyers. “Europe has pipeline supplies and China and Japan don’t have alternatives.”

In other words, the European market may not be as key for U.S. gas exports as some media coverage would have you believe. Some of that coverage includes a report that U.S. energy companies are once again in a rush to build more liquefaction capacity in a bid to take advantage of Europe’s gas shortage.

Additional gas export capacity would certainly be in order in a scenario featuring growing global demand for gas. However, the current shortage of gas in Europe will be over long before any of that new capacity comes online. After all, LNG projects take years and billions of dollars to complete, so any capacity boost should be based on the long-term outlook for the commodity.

The Real Reason OPEC+ Refused To Boost Production Further This outlook seems quite bullish right now. The energy crunch in Europe and Asia has shown that Europe may have rushed a bit with its energy transition, making itself vulnerable to high commodity prices when renewables fail to deliver as expected. So, it does make sense for U.S. LNG companies to build more export terminals.

As for capitalizing on the current crisis, the opportunities are limited, and it’s not because of Gazprom. Analysts point to the output loss resulting from this year’s hurricane season in the Gulf of Mexico as one constraint on U.S. gas exports, and to the continued production discipline among shale drillers.

“At any other time, we would have seen a huge surge in investment,” Kristen, Holmquist, LNG forecasting manager at broker Poten & Partners, told Natural Gas Intelligence. “What we’re seeing instead is that companies are being very disciplined,” she added, as a direct consequence of last year’s industry crisis.

Related: Is America Doomed To Replicate Europe’s Energy Crisis?

U.S. LNG has never been particularly competitive in most of Europe because of the availability of pipeline gas. Still, in earlier years, the major boost in global LNG capacity brought prices to comfortable lows on spot markets, making U.S. gas a welcome addition to European sources of energy. That did not—and could not—last because of how demand developed. Now, spot cargos are mostly prohibitively expensive for European buyers.

Going forward, a rebalancing of the gas market could once again make U.S. gas popular with European buyers, for diversification reasons if nothing else. Yet, with Asia’s insatiable appetite for energy and its willingness to pay a premium for U.S. LNG because of the lack of major pipeline supplies, it is likely to remain as the ultimate market for U.S. LNG.

This means shale drillers needn’t worry about Russian competition in Europe — Europe is, after all, on a quest to wean itself off gas, so whatever dominance Russia has on European energy markets should be over by 2050 if all goes well.

By Irina Slav for Oilprice.com

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  • Kay Uwe Boehm on October 12 2021 said:
    Europe simply has much own gas also fracking gas possibility in FRG, france and england with highly connected gas pipeline system and 36 LNG terminals most gas from norway in future from mediterian sea already from israel etc.

    Solar desalination and purification set with black bottom plate and flapable side walls, one (plexi) glas and gutter, black coca cola colour to add in salty or dirty water placed in sun in hot area enough water ?

    There is always enough water in air also not rauning down but to be condensed out of air with pressure increase increasing the boiling ooint and cooling just ask scuba divers filling their air bottles but needs much energy that is no problem if eternal and cheap but not needed also delivering energy from air heat instead burning fossil fuels for that and aircondition for free just sucking hot air with centrifugal compressor inside more hot and dense cooled with CO2 for turbine at end in turbune cycle 2. cf comoeesor CO2 backflow cooling of whole turbine system that way thermal isolatable no heat lost then air expanded driving partly comoressor is cold same if letting out from scuba diver bottle or icing CO2 bottle and much water condensed out of air new technology to make the turbines also for coal or nuclear power plants can double electricity output and halving price usable also for sabatier CNG out of H2O electrolyse H2 + air CO2 easy out with gas centrifuge since more heavy than O2, N2 & Ar.

    Cold fusion shooting protons or Hg nucleoses into water side effect Hg-197 decay gold.
    India did starr or build also Na sodium fast breeder reactor recommended about same with lirhium-7 isotope as coolant & neutron moderator for thorium breeding secure with bubble slow down effect that Na does not have and very less neutron capturing left for fission and breeding also more reserves melting
    180 boiling 1340 critcal not liquid always gas at 2950°C water 274°C, itself never radioactive, better cooling than Na, hot only 0.5g/ccm means all extractable etc.
  • Mamdouh Salameh on October 13 2021 said:
    The Asia-Pacific region will continue to be the ultimate destination for US LNG exports well into the future because Asia is the world’s biggest market for LNG with higher prices and bigger purchasing power than anywhere else. The market is big enough to absorb all LNG exports from Qatar, Australia, Russia and the United States.

    US LNG or even Qatari LNG can’t compete against Russian piped gas to the EU. Still, they will get a small share of the market.

    Europe can’t wean itself now or ever off gas because its energy transition can’t succeed without natural gas. Europe’s rush to accelerate energy transition at the expense of fossil fuels was the very reason the continent is now in dire straits with rising energy prices and gas shortages. Therefore, Russia’s dominance on the EU market is virtually indefinite and unassailable.

    Europe’s energy crisis has shown that those who call for ditching fossil fuels to accelerate energy transition live in a world of fantasy.
    Fossil fuels are here to stay.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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