Russia Could Fend off US LNG Plans for Europe

MarineLink.com
Monday, March 10, 2014

By Oleg Vukmanovic and Henning Gloystein, Reuters

As Russia tightened its grip on Ukraine's Crimea region this month, U.S. and European Union officials were urging the Obama Administration to speed up approvals of more liquefied natural gas (LNG) export terminals.

Yet Russian exporter Gazprom's ability to swamp European natural gas markets with supply while depressing prices will make it difficult for as-yet unavailable U.S. supplies to displace Russian gas in Europe.

The EU is keen to diversify away from Russian gas imports, a stance hardened by Gazprom's decision to switch off supply to Ukraine during a pricing dispute in 2009 which curtailed supplies to EU member states, as well.

Yet U.S. LNG, exports of which are expected to ramp up beginning next year, are not a silver bullet in supply diversification for Europe.

State-controlled Gazprom sells most of its gas to Europe in long-term deals that are partly linked to the price of oil.

It has recently agreed major price reductions with most of its European customers, including Germany's E.ON and RWE, France's GDF Suez and Italy's ENI and Edison.

The move has helped defend its leading position in Europe, including from potential U.S. shipments, and industry sources say that Russia may agree to further discounts.

U.S. exports to Europe would barely break even at current spot market prices, as operating costs, fees and shipping rates would push the price of U.S. cargoes above European spot levels.

"Prices don't need to go down further to cap new 2020 supply," said Thierry Bros, senior gas analyst at Societe Generale, adding that such a fall would effectively rule out any significant role for American LNG in Europe.

Only a slight drop in Russian long-term prices or a rise in U.S. gas prices would see North American LNG cargoes to Europe pushed out of the market by Russian gas pipelines as well, Reuters research shows.

Asia is Better for LNG
European spot gas prices currently stand at around $10 per million British thermal unit (mmBtu), half of what Asian buyers pay. Because U.S. prices are below $5 per mmBtu due to the shale gas production boom, U.S. LNG exports have become attractive.

Although U.S. spot gas prices are low, however, forward curves show prices rising in North America while Europe's contracts come down.

That means even just slight further rebates by Russia or a move towards more EU spot market indexation would effectively push U.S. LNG out of the market in Europe.

"Lower European prices could make U.S. LNG profitable for the Asian market alone," said Thierry Bros.

Political Gas

Although the United States has overtaken Russia as the world's biggest gas producer, there's an important difference in the politics of energy between Washington and Moscow.

Private companies and market mechanisms determine U.S. trade flows, which make it difficult for the United States to wield energy as a tool to punish Moscow. That points to LNG cargoes steering away from Europe towards higher-value Asian and Latin American markets given current price trends.

Not so in Russia, where state-controlled Gazprom granted heavy price discounts to reclaim lost market share.

That policy allowed Russian gas exports to Europe last year to rise to record levels, while LNG suppliers or pipeline competitors like Norway's Statoil saw their European market shares shrink.

(Editing by Jason Neely)

Maritime Today


The Maritime Industry's original and most viewed E-News Service

Maritime Reporter July 2016 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

Tanker Trends

NASSCO Delivers Garden State to APT

Marking its seventh ship delivery in the span of just over a year, General Dynamics NASSCO has delivered the newly built ECO Class tanker Garden State for American Petroleum Tankers.

Bahri Q2 Net Profit Soars

National Shipping Company of Saudi Arabia (Bahri), the exclusive oil-shipper for Saudi Aramco, reported a 47.2 percent increase in second-quarter net profit on Tuesday.

First LNG Vessel Transits Expanded Panama Canal

Today, the Panama Canal marked another milestone with the transit of the first-ever liquefied natural gas (LNG) carrier through its expanded locks.   Shell-chartered

LNG

Staying Afloat Down Under?

In recent years, Australia has been a major growth area for offshore gas production and a key driver of offshore CAPEX, says Clarksons Research.   However, the

LNG-fueled Bulker Ordered from Korea

Hyundai Mipo Dockyard (HMD) has signed a contract to build a 50,000 dwt bulk carrier with ILSHIN LOGISTICS. The project is a collaboration between POSCO and ILSHIN

VesselValue.com: $28.4B Worth of Ships Delivered to Date

As the calendar now indicates we have passed the half year mark on 2016, VesselValue.com offers insight on the number and value of all the 2016 built vessels that

News

Cambodia Urged ASEAN to Avoid Words That Escalate Tension

Cambodia advised a grouping of South East Asian nations to avoid using words that "would escalate tension between China and the Philippines" in a weekend statement,

Technip Bags Woodside's Subsea Contract

Technip has been awarded a large(1) subsea contract by Woodside to support the development of the Greater Enfield Project offshore Western Australia, at a water

Keel Laying for Russia's Second Nuclear Icebreaker

Today the Baltic Shipyard in St Petersburg (part of United Shipbuilding Corporation) laid the keel of Ural, Project 22220’s second series-produced nuclear icebreaker.

Government Update

Cambodia Urged ASEAN to Avoid Words That Escalate Tension

Cambodia advised a grouping of South East Asian nations to avoid using words that "would escalate tension between China and the Philippines" in a weekend statement,

Guzmán Re-elected Harbor Commission President, Long Beach Port

Harbor Commission President Lori Ann Guzmán was re-elected Monday evening to serve a second one-year term leading the board that oversees the Port of Long Beach, the nation’s second-busiest seaport.

China Asks U.S. to Support Resumption of Talks with Philippines

China's foreign minister has asked the U.S. secretary of state John Kerry to support the resumption of talks between China and the Philippines over the South China Sea,

 
 
Maritime Careers / Shipboard Positions Maritime Security Maritime Standards Navigation Pod Propulsion Port Authority Ship Repair Ship Simulators Sonar Winch
rss | archive | history | articles | privacy | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.2132 sec (5 req/sec)