Why American LNG cannot win in Europe

When Washington imposed sanctions on companies, the measure generated criticism not only of Russia but also of Germany. The sanctions, aimed at companies that are building the pipeline that will increase Gazprom’s export capacity for Europe, were seen as interference in Germany’s internal affairs, while the legislators who approved them saw them as a tool to deter Russian energy influence in Europe. For some, however, the reason for the sanctions was the United States’ own energy plans for Europe.

The Trump administration is following an agenda of energy domination, and this domination must include Europe, which is one of the largest markets for natural gas and, what is most relevant to the United States, liquefied natural gas. However, the lessons of history, and that is a Gazprom story, would suggest that the energy domination approach will not work, not in Europe.

Liam Denning of Bloomberg recently reviewed a book written by an IHS Markit expert on Russian energy, Thane Gustafson, entitled The Bridge. The bridge, according to Denning, contains, among other things, a warning story for US gas ambitions in Europe. The essence of this is that the European gas market is much more open and transparent than it used to be, and although this has served to reduce the influence of Gazprom on the continent, it has also served to deter any other person who wants to try take the place of Gazprom.

The truth is that today, Europe has developed a continental gas network, and that network has LNG terminals. This means that many European countries are today much more flexible in their gas imports than 30 years ago, when Russia and Norway dominated the market. There is only one trap: LNG has to be cheap enough to overcome alternative supplies. Related: Iran’s crisis is far from over

Poland is already buying liquefied natural gas from the USA. UU. The country is ready and willing to pay more if necessary to reduce its dependence on Russian gas for several historical reasons. However, last year, Bulgaria also bought two loads of US LNG at the Sabiere Pass liquefaction plant in Cheniere. According to the head of the state gas operator, the charges were assessed at the level of local reference prices.

Even so, Poland and Bulgaria are small potatoes. Germany is the largest gas market in Europe and will become even larger as the country intends to close all its remaining nuclear power plants by 2022. That’s why Gazprom is building Nord Stream 2 with the blessing of Angela Merkel, after all. And that is why the United States is sanctioning it if we ignore the ideology that each government uses to advance its purely pragmatic agenda.

Germany imported $ 14.6 billion in natural gas in the first half of 2019. That was 14.8 percent higher than the previous year, but the increase in terms of volume was even greater: they reached 2.66 million terajoules, which It was 20 percent higher than the period of the previous year. Historically, most of the imported gas comes from Russia, followed by Norway and the Netherlands. Now that the Netherlands is closing its flagship Groningen ahead of schedule, Germany will need more gas from Russia and Norway. I could import LNG from the USA. UU. According to an EU promise to President Trump, provided the price is right, as the EU Energy Commissioner said last year.

However, due to the open and transparent nature of the gas market in Europe, Germany is also buying LNG from Russia. Last month, Novatek opened its first LNG service station in Germany. It is the first LNG station of the Russian company in Europe and could mark the beginning of a network.

That is why the dominance of energy is a challenging objective in the gas market in Europe. The fact that Germany and others are building new LNG terminals does not force them to use these terminals for US LNG. Qatar is just around the corner, so to speak, as are Nigeria and Algeria, both large producers of LNG. The competition is intense and in sight. The victory that the EU competition guardians achieved in their fight with Gazprom’s long-term contracts paved the way for the current competitive environment that leaves Gazprom and the US LNG producers. UU. At the mercy of market forces.

By Irina Slav for Oilichelin

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