ZCZC
BCN-03
US-EU-DIPLOMACY-TRADE-NATURAL-GAS
Trump pledge EU to become big importer of US gas met with skepticism
NEW YORK, July 27, 2018 (BSS/AFP) – President Donald Trump said the
European Union would soon become a “massive” importer of US natural gas, but
some energy analysts expressed skepticism at such an outcome.
Trump, joined by European Commission chief Jean-Claude Juncker, said
Wednesday that the two key economies reached agreement to boost trade of
liquefied natural gas (LNG) and soybeans as they defused an escalating trade
dispute.
But exporting LNG is an expensive business and likely will not be a big
part of European energy anytime soon, experts said Thursday.
“What counts for the European consumer is the price,” said Thierry Bros, a
researcher at the Oxford Institute for Energy Studies, who noted the lofty
costs of US LNG.
After Europe liberalized its energy markets, “the price is set between
buyers and sellers at the exchange in Holland,” he added.
Unlike oil, which already is in liquid form, natural gas must first be
liquefied at a factory in the United States before it is shipped and then re-
gasified in Europe at another plant. By contrast, conventional natural gas
can just be sent to the EU via pipeline.
“I don’t see how the US can force European clients to buy US liquefied
natural gas that is more expensive,” said Matt Smith, analyst at ClipperData.
A senior EU official agreed with that assessment.
“We are not going to turn into a Soviet style economy” that can order up
more imports, the official said.
“The EU wants to increase imports… the text does not say that the EU is
committing to increase imports. It is not a declaration of intent.”
– US shale boom –
The spotlight on US natural gas exports comes as supply of the commodity
remains robust amid an American shale boom that has elevated US standing in
the world of oil and gas.
LNG exports from the US quadrupled in 2017 and the country became a net
exporter of natural gas for the first time in 60 years.
Boosting exports further would lower the US trade deficit, a focal point
for Trump.
“The European Union wants to import more liquefied natural gas (LNG) from
the United States to diversify its energy supply,” the joint agreement said.
Juncker said the EU was prepared to invest to build additional
infrastructure for LNG.
But analyst Bros notes that is not really the issue: current LNG import
facilities are only running at about 26 percent of full capacity.
European gas imports have been on the rise for a while, increasing 4.3
percent in 2017 to 467 billion cubic meter as production fell 5.3 percent to
118 billion cubic meters.
The trading bloc has sought to diversify supply away from Russia, which
currently accounts for about one-third of the region’s gas.
Europe has embraced gas from Azerbaijan as part of this strategy. But LNG
also is a promising source of additional supply, whether from Qatar,
Mozambique, Australia or the United States.
Trump has repeatedly touted US gas as a solution to Europe’s conundrum,
while castigating the Nord Stream 2 pipeline project that could double gas
shipments from Russia to Germany.
US exporters until now have sent most gas to Asia and Latin America. In
2017, more than 50 percent of US LNG exports went to three countries —
Mexico, South Korea and China.
But “the ramp up in US LNG exports has only just begun,” said S&P Global
Platts, which projected that LNG exports from the US would more than
quadruple by 2020 following construction of new liquefaction plans, according
to S&P Global Platts.
US natural gas producers have become more efficient in extracting natural
gas, another factor that “would likely raise the competitiveness of US LNG,”
said S&P Global Platts.
BSS/AFP/MRI/0838 hrs