US first LNG shipment to Europe challenges Russia’s monopoly
A new era for energy in Europe will be marked by the first US LNG shipment that will arrive in Portugal in a few days. The cargo of American liquefied natural gas (LNG) was recently sent from Cheniere Energy’s newly completed Sabine Pass facility on the U.S. Gulf Coast.
Melissa Stark, energy managing director at Accenture, told Bloomberg that the LNG shipment coming out of the United States is probably the most critical thing that will transform the future of the global LNG market.
Jonathan Stern of the Oxford Institute for Energy Studies, in an email to Bloomberg said, that this move’s geopolitical symbolism may be strong but the current volume of the US LNG supply to Europe will be insignificant at the moment until the bigger volumes come on stream in 2018-2019. He also said that the shipments will probably go to places with higher value markets like Latin America.
The US LNG supply will be competing with cheaper natural gas in the European market imported from Russia. A few months ago, Russia’s state-owned Gazprom said that they want to push European gas exports to record levels and they are confident that US LNG won’t steal their market.
Gazprom argues it can undercut U.S. LNG on price. “In a five-year perspective, the cost of U.S. LNG is seen higher than forward prices at the British hub NBP,” Alexander Medvedev, a top Gazprom official said in New York in January, referring to a benchmark natural gas price in the UK. “Imports of North American gas to Europe will be limited.”
Currently, Gazprom sells gas to Europe at a price of about US$5.80 per million Btu (MMBtu) on average, but could lower the price to beat U.S. LNG. But the mere existence of a source of supply and the growing export capacity of the United States should push down the price that Gazprom is able to charge.
According to a report on the Wall Street Journal, Thierry Bros, an analyst at SociétéGénérale said that this is the start of the price war between US LNG and pipeline gas from Russia.
Source: Oil Price