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Europe Turns a Natural Gas Arena for Russia and the US

Yamal LNG


The European Union (EU) is both a prized market and political battleground for the world’s largest energy exporters—especially natural gas. Russia has been a dominant supplier of natural gas to Europe, however, the US reportedly wants to challenge Russia by increasing its imports of U.S. liquefied natural gas (LNG).

Europe allegedly is eager in getting over its reliance off Russian gas. And this was reported in overtures made by the country to the U.S. last July. And, European Commission President, Jean-Claude Juncker, and President Donald Trump agreed to strengthen the strategic cooperation between the U.S. and the EU with respect to energy. Meanwhile, the EU said that it would import more LNG from the U.S. to diversify and to secure its energy supply.

In the context, the EU said in a document detailing the state of EU-U.S. LNG trade in late November that U.S. LNG, if priced competitively could play an increasing role in EU gas supply, enhance diversification, and the EU energy security.

Meanwhile, in 2017, the U.S. became a net neutral gas exporter and saw exports of its LNG rise 58% through the first half of 2018. And, according to the country’s Energy Information Administration (EIA), in 2018, U.S. natural gas pipeline import and export volumes remained relatively flat or declined from the 2017 levels. U.S. exporters looking to Europe allegedly have a big obstacle and that’s Russia. According to the Commission’s latest data on EU imports of energy products in October, Russia remained to be the largest supplier of natural gas to the EU in 2018. And the Commission highlighted the EU’s reliance on Russian gas by stating that 11 member states including Bulgaria, Romania, and others imported more than 75% of total national imports of natural gas from Russia in 2018, which was attributed to the proximity to the country.

Gas from Russia reportedly is supplied to the continent via the state-owned gas company, Gazprom through pipelines. And, this gives it the advantage of cheaper transportation costs and establishing infrastructure and supply.

Meanwhile, it is reported that five EU companies are involved in the construction of Nord Stream 2 and the EU expressed concern on the sanctions, which could be placed by the U.S. on companies involved in the project. In the context, RBC Capital Markets’ Christopher Louney, a commodity strategist reiterated that there was a geopolitical nature to the competition for European LNG customers. He added that Europe taking U.S. LNG and U.S. LNG challenging Russian pipeline supplies for dominance are two different things. And with more U.S. export facilities coming online, the takers could increase, but in the context of pre-eminence, there was still a long way to compete with Russia.

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