World

US May Undermine Russian Gas Monopoly In Europe

| by Diana Kruzman
Gazprom facility in Moscow, RussiaGazprom facility in Moscow, Russia

New shipments of liquefied natural gas (LNG) from the U.S. to Europe will soon compete with Russian exports to the continent, challenging Russia’s dominance in the energy market there.

A tanker from Cheniere Energy, which recently completed its Sabine Pass facility in Louisiana and has already sent shipments to Brazil, Argentina and India, will contain the first shipment of American LNG to arrive in Europe once it reaches its destination in Portugal, according to Bloomberg.

The U.S. is now the world’s biggest producer of LNG from shale deposits and is set to become a net exporter in 2016 after years of stagnation. These exports will affect the global energy market as a whole, contributing to an 18 percent increase in global LNG capacity through 2017.

“LNG coming out of the U.S. is probably the single most important thing that will transform the future LNG market,” Melissa Stark, energy managing director at the management consulting services company Accenture, told Bloomberg. “It heralds the arrival of a global market.”

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One effect of this transformation is the competition with Russia, which currently supplies one-third of Europe’s total gas demand. European LNG imports have experienced a dramatic increase, climbing 16 percent between 2014 and 2015, and continuing this trend will elevate the importance of U.S. natural gas shipments.

Some analysts say that this increase will have few tangible effects on the market in Europe, as Russian state-owned energy giant Gazprom offers lower prices and greater accessibility to European buyers.

“U.S. LNG supply to Europe may have strong geopolitical symbolism, but its current volume impact will be negligible, until the big volumes come on stream in 2018-19,” Jonathan Stern, chairman and founder of the natural gas research program at the Oxford Institute for Energy Studies, told Bloomberg.

However, others point to a recent study by consulting group Wood Mackenzie Ltd., which predicted that the U.S. will send 55 percent of its LNG exports to Europe by 2020, as proof that Russia’s dominance over the energy market in Europe will soon change.

“It’s the start of the price war between U.S. LNG and [Russian] pipeline gas,” Thierry Bros, an analyst at financial services company Societe Generale, told the Wall Street Journal.

Sources: Bloomberg, Wall Street Journal / Photo credit: greg westfall/Flickr

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