That’s All Gas: US LNG Exports Cannot Squeeze Russia From European Market

The US has announced plans to expand its LNG exports, including to Europe. However, according to experts, gas supplies from the US will not change the situation in the European energy market.

The US plans to expand its exports of liquefied natural gas (LNG), US Department of State Special Envoy and Coordinator for International Energy Affairs Amos Hochstein told Sputnik.

According to him, the "market will determine" where the deliveries will flow. Hochstein named the first LNG delivery from the US to Portugal as an example of the expansion.

"I think it’s the beginning of an exciting era in American supplies of LNG into Europe that will help diversify the supply system in Eastern Europe in particular. And that’s a good thing for everybody involved," he underscored.

The first LNG shipment from the US arrived in Portugal on April 27, under a contract between Portuguese firm Galp Energy and American company Cheniere.

The US started exports of LNG in February when the first shipment arrived in Brazil. Then, Cheniere signed long-term contracts with a number of European companies, including Britain’s BG Group and Spanish company Gas Natural.

Washington has long been arguing in favor of LNG exports to Europe, claiming it will help European allies decrease dependence on energy imports from Russia.

There can be no concerns that American LNG could replace shipments of Russian gas in the European market, Maria Belova, senior analyst at Vygon Consulting, was quoted as saying by Ridus agency.

"That is only in plans. The bulk of US tankers were for Latin America. The current average LNG price in Europe is nearly $4 per British thermal unit. It is not profitable for US companies," she said.

The shipment to Portugal is a one-time event because US companies would make profit only if LNG is $200 or more per cubic meter. Currently, the price is $140.

With the current oil price (the LNG price is tied to crude prices), the US will not expand their deliveries to Europe.

"This contract cannot change the situation in the market. It rather demonstrates the possibility of such deliveries," Andrei Lusnikov, senior analyst at Finmarket agency, pointed out.

For 40 years, the US kept an embargo on oil and gas exports. After the ban was lifted many US companies began looking for new markets.

At the same time, the fact that the US has entered the global gas market as a supplier would make the market more stable. It would also help Europe reduce its reliance on its traditional energy partners – Russia and Gulf countries.

Nevertheless, Russia delivers 160 billion cubic meters of gas a year to Europe, and 30 billion cubic meters of US supplies will not change the situation. In the first quarter of 2016, Gazprom increased its exports abroad by 19.8 percent, against the same period in 2015.