The first U.S. LNG shipment through Cheniere Energy’s Sabine Pass facility on the U.S. Gulf Coast will arrive in Portugal within a few days. American liquefied natural gas coming to Europe is important and is said to transform the future LNG market there. This move by the United States is also considered to end the monopoly of Russia in Europe.
This happened at a very crucial time considering the Gas scenario in Europe. LNG demand in Europe is on the continuous rise wherein the domestic production is falling and increased import by almost 16% in the year 2015.
But the Gas supply by Cheniere Energy alone to Europe is a very negligible quantity considering the huge demand there. With much more LNG, export terminals under construction along the Gulf Coast are expected to start exporting big volumes to Europe by 2018 – 19.
Though the United States has entered the European market and aims to export big volumes by the year 2019, it will face stiff price competition with the cheaper Natural Gas from Russia. Gazprom (Russian Government-owned company), the world’s biggest natural gas producer informed its investors in Feb 2016 that “we provided 31 % of Europe’s gas consumption last year, plan to boost flows to the region by more than 2 % this year, with further growth through 2018”. Their vision is to hold on to this level of Gas market share through the year 2035, despite the rising consumption in Europe.
On the cards is a Gas price war between U.S. LNG and Gazprom LNG through the pipeline. U.S. LNG would need prices of, say, $4 to $5/MMbtu to be commercially viable, and Gazprom can afford to sell at $ 3.50/MMbtu and still make profits. The price of the present Gazprom LNG in Europe is about $5.80/MMBtu.
United States plans to export about 55 % of its total LNG production or approximately 32 million metric tons a year to Europe by 2020. During this era of the fierce Gas price war between Russia and the United States, Europe is sure to benefit!