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American LNG Declares Price War On Pipeline Gas In Europe

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By Georgi Gotev

(EurActiv) — A tanker loaded with US natural gas is en route to Portugal. It may not appear to be newsworthy, but it is considered a game changer, as this is the first shipment in a trade relationship that could shake up the EU market, which relies heavily on Russian pipeline gas.

The 970-foot long Creole Spirit, carrying liquefied natural gas, is expected to arrive by the end of April, according to shipping data and people familiar with the matter, the Wall Street Journal reported on Thursday (21 April).

Separately, on 19 April, the Interpid cargo shop brought 27,500 cubic metres of American ethane to Norway, The Guardian announced last month. Ethane is a component of natural gas that is separated out and can be turned into a liquid to make it easy to transport. This is believed to be the first American shale gas to arrive in Europe.

American gas will add to a crowded market long dominated by Russia. Analysts predict that the arrival of US gas could trigger a price war, leading to lower prices for consumers that could act as a shot in the arm for the struggling European economy.

The US began selling Gulf Coast gas abroad for the first time in February, marking its emergence as a major exporter. After a yearlong effort by Houston-based Cheniere Energy, the first shipment went to Brazil, with subsequent shipments heading to Asia.

Gail India Ltd. bought the second shipment of liquefied natural gas from Cheniere Energy, last March.

“It’s the start of the price war between US LNG and pipeline gas,” said Thierry Bros, an analyst at Société Générale, quoted by the WSJ.

In the past, exports of oil and gas were banned in the US, as the country was a net importer.

But the massive ramp up in US shale oil and gas production, which has seen the price of both oil and gas plummet worldwide, has encouraged Barack Obama to change the law.

In Europe, US suppliers will square off with Russia, which currently supplies about a third of the continent’s gas via pipeline. Germany, for example, gets half of its gas, and Italy a third, from Russia. Norway, Algeria and the Middle East are other major sources of gas for the continent.

Analysts say that Russia could cut the prices it charges its European customers to try to chase away the new US competitors.

Russian gas export monopoly Gazprom said earlier this year it wasn’t planning a price war. But if American LNG prices did fall, the company “would seek to cut its own costs,” Gazprom’s deputy chairman Alexander Medvedev said in February.

Pipeline gas can be cheaper than LNG, because that gas has to be liquefied, shipped and re-gasified at arrival. But many in Europe see the US entry into the market as part of a broader geopolitical effort to challenge Russian domination of energy supplies and prices.

The impact of US gas in Europe “will be gradual, but it does start to change everything”, said Trevor Sikorski of London-based consultancy Energy Aspects, as quoted by WSJ.

“The new LNG will put downward pressure on prices, and losing both volume and value could be a hard pill to swallow,” for Russia, he said.

EurActiv

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3 thoughts on “American LNG Declares Price War On Pipeline Gas In Europe

  • Avatar
    April 24, 2016 at 11:12 am
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    But in such price war, the US will also lose! Since Russia supplies only about 30% of EU gas, there is ample room for US gas to supply the other 70% – assuming that LNG is cheaper than Russian piped gas, which it isn’t. In addition, there are limited facilities in the EU to receive LNG. Construction to build the necessary receiving terminals would amount to around $2b according to earlier studies. That will by necessity add to the price of shale gas. Wether that is ultimately still lucrative for the EU is questionable. By the same token, if the price the US can reach for its shale gas is low, it may not be worth it for the US either. Much is being made of things that at this time are not conclusive yet.

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  • Avatar
    April 24, 2016 at 11:59 am
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    “The new LNG will put downward pressure on prices, and losing both volume and value could be a hard pill to swallow,” said someone called Sikorski.

    No one seriously believes that fracking gas, whish is rapidly fracking up huge areas in America including nearby lakes and rivers, will ever replace piped gas. Indeed it is believed that the American/Saudi/Qatari desire to build a gas pipeline from Qatar through Syria is the real cause of the Syrian war.

    A price war might be beneficial to Europe but people have learned through bitter experience that American involvement outside the U.S. usually results in blight, death and destruction, without it being of benefit to the American people

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  • Avatar
    April 25, 2016 at 3:48 am
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    Gotev is correct: after much research I too am convinced that fracking all over the US in order to produce LNG from shale gas is a US geopolitical effort to undermine Russia as an energy producer. And Marco, above, is correct that the Syrian war is about the US/Saudi/Qatari desire to run their Sunni Pan-Arab pipeline through Syria to the EU with the same goal: to undermine Russia as energy provider. The reason the Saudis/etc. are so hot to be rid of al-Assad is that he rejected the Pan-Arab pipeline in favor of a Shia pipeline organized by Iran/Iraq/Russia. As an aside, the 13 yr. effort to pacify Afghanistan also relates to pipelines, namely the TAPI being built from Turkmenistan through Kandahar (Afgh) through Quetta (Pak) to SE Asia.It’s an unpleasant fact that we are now living on an exhausted planet where the corporations that are running everyone’s lives are in a frantic competition to buy up the remaining resources: oil, nat. gas, ag. land, water, minerals. The US aim is to end up as sole hegemon by ruining Russia economically (or any other way it can) and getting control of the Eurasian land mass in order to push through and “contain” China, which obviously does not wish to be contained. If you throw in the Anglo/US/Zionist plot to run the world, you will have a pretty complete understanding of the forces that are operating beneath the increasingly stupid headlines designed to keep citizens confused including the fatuous notion of “Russian aggression.” There is no Russian aggression I’ve been able to identify. It is US aggression usually engineered by the CIA or a batch of NGO’s with nice-sounding names, stirring up trouble that didn’t need to be stirred up. The NGO’s are nearly always backed by plutocrats like George Soros, or the Koch brothers or by the State Dept. or USAID. Even Human Rights Watch and Amnesty Int. are tools of the US govt. And in the US we’re all fixated on an irrelevant election that will not change a thing.

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