Rising US Natural Gas Output Challenges Russia’s hold In the European Market

LNG Tanker

LNG Tanker

The Energy Information Administration sees the gas output in the United States to be approximately 77.34 billion cubic feet a day in the year 2018, which is up by 1.2% than its earlier estimate of 76.42 billion cubic feet.

The increase is mainly due to higher exports and gas-fired power plants generating more electricity. According to the European Commission, out of the total gas consumption in the first quarter of 2017 in the continent, nearly 41% of gas came from Russia.

The US sanctions signed last week by President Donald Trump may hit Russia’s gas production, in turn, is likely to affect exports to European countries. It has happened precisely at the time when energy output is continuing to surge. It has shown uptrend from the year 2005 and it is much more than the domestic consumption today. As per the Department of Energy,  the country will become a net exporter of energy in the year 2018. The rapid growth of shale gas extraction is one of the major reasons for the rise in natural gas output.

Another major factor helped US gas export is Cheniere Energy started shipments from its natural gas liquefaction plant located in Louisiana since last year. Till that time the only way for exporting gas was pipeline links to Mexico and Canada or a few ships carrying gas were leaving from Alaska. About 13% of the shipments have been exported to Europe after the establishment of Cheniere Energy. Four more projects like Cheniere Energy are under construction in Texas and in Maryland along the East Coast.  Earlier a lot of the US natural gas that could be exported was being directed to Asia by tankers, and the transportation cost was very high. But today more and more of US gas has started to migrate to Europe as the transit costs are lower.

More US gas reaching  European countries will give them an alternative to Russian gas, and hence they will have better control over pricing, which at present they are not able to as they are heavily dependent on Russia for gas.

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