Why U.S. LNG Can’t Win In Europe
Authored by Irina Slav via OilPrice.com,
When Washington imposed sanctions on companies, the move drew criticism not just from Russia but from Germany as well. The sanctions, targeting firms 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 for deterring Russia’s energy influence in Europe. For some, however, the reason for the sanctions was the U.S.’s own energy plans for Europe.
The Trump administration is following an agenda of energy dominance, and this dominance has to include Europe, which is one of the biggest markets for natural gas and, what’s more relevant to the U.S., liquefied natural gas. However, lessons from history, and that’s a history of Gazprom, would suggest that the energy dominance approach won’t work – not in Europe.
Bloomberg’s Liam Denning recently reviewed a book by an IHS Markit expert on Russian energy, Thane Gustafson, titled The Bridge. The Bridge, according to Denning, contains, among other things, a cautionary tale for U.S. gas ambitions in Europe. The gist of it is that the European gas market is a lot more open and transparent than it used to be, and while this has served to reduce the influence of Gazprom on the continent, it has also served to deter anyone else that might want to try to take Gazprom’s place.
The truth is that today, Europe has developed a continental gas network, and that network features LNG terminals. This means that many European countries are today a lot more flexible in their gas imports than they were 30 years ago, when Russia and Norway dominated the market. There is just one catch: the LNG has to be cheap enough to beat alternative supplies.
Poland is already buying U.S. liquefied natural gas. The country is ready and willing to pay more if it has to, in order to reduce its dependence on Russian gas for a number of historical reasons. Yet last year Bulgaria, too, bought two cargos of U.S. LNG from Cheniere’s Sabine Pass liquefaction plant. According to the head of the state gas operator, the cargos were priced at the level of local benchmark prices.
Even so, Poland and Bulgaria are small potatoes. Germany is the biggest gas market in …read more