16:41 GMT +317 August 2019
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    The LNG tanker Clean Ocean is pictured during the first U.S. delivery of liquefied natural gas to LNG terminal in Swinoujscie, Poland June 8, 2017

    US Risks Losing Its Positions on EU Energy Market, Here's Why

    © REUTERS / Agencja Gazata/Cezary Aszkielowicz
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    China's appetite for natural gas is increasing, making American exporters of liquefied natural gas turn to Asia. At the same time, Washington risks deteriorating its relatively weak position on the European energy market due to its tariff and sanctions spree.

    While Washington is trying to cut off Russia's pipeline gas deliveries to Europe, it appears that the US may lose the European energy market.

    One of the reasons behind the trend is strong demand for liquefied natural gas (LNG) in Asia. According to Reuters, Asian spot LNG prices hit a 4-year high in June 2018: "Spot prices for July LNG-AS delivery in Asia jumped to $11.60 per million British thermal units (mmBtu) this week, up $1.80 per mmBtu versus last week," the media outlet noted, adding that August prices were trading up to 10 cents higher.

    China's Growing Gas Demand

    China's growing appetite for liquefied hydrocarbons is fueled by the country's shift to cleaner sources of energy. As S&P Global Platts predicts, strong Chinese demand will most likely continue prompting markets to bet on prices at more than $9/mmBtu through first-quarter 2019.

    While Russia's "The Power of Siberia" is expected to kick off in 2020 and reach the projected capacity only by 2025, Beijing is becoming increasingly dependent on liquefied gas. According to The Financial Times, the country imported almost 60 percent more supercooled fuel in the first four months of 2018 compared to the same period in 2017.

    Although Australia, Qatar and Malaysia remain East Asia's major LNG suppliers, the US is ready to jump on the bandwagon: "[High] price levels should drive a record share of US cargoes to consumers in East Asia this summer, with South Korea, China and Japan likely to import the majority of those volumes," S&P Global Platts notes.

    In April, the first batch of American LNG arrived in China through the reconstructed Panama Canal. In general, the US delivered about 196 billion cubic feet (bcf) to East Asia this year. For comparison's sake, American LNG exporters shipped just about 65 bcf to Asia over the same period last year. Given that total US LNG exports in 2018 have amounted slightly more than 406 bcf, it means that "nearly half of all US cargo sales have targeted East Asian buyers this year," the energy news site emphasized.

    Golden Pass LNG Terminal on the Sabine-Neches Waterway in Sabine Pass, Texas
    Golden Pass LNG Terminal on the Sabine-Neches Waterway in Sabine Pass, Texas

    US-China Tariff War: Why American LNG Remains Unaffected

    Despite the Sino-American trade war gaining pace, with Donald Trump pledging to introduce new tariffs on $200 billion in Chinese goods if Beijing continues taking tit-for-tat measures, China has not subjected US LNG to additional taxation. Earlier, responding to the imposition of 25-percent tariffs on $50 billion worth of imports, Beijing included almost all American energy-related commodities in its retaliation list.

    "LNG is clearly seen as an essential good by the Chinese government," Nicholas Browne, head of Asia-Pacific gas and LNG for Wood Mac, said as quoted by Bloomberg. "Given this, in the event of an escalation, LNG is likely to remain outside the bounds of any additional tariffs."

    EU Market: US' LNG vs Russia's Pipeline Gas

    While China is increasingly absorbing liquefied hydrocarbons, the European gas market losing its relish for American exporters, although rising Brent has sent natural gas prices higher this year.

    US LNG supplies to Europe pale into insignificance when compared to Gazprom's sales of Russian pipeline gas.

    According to the Gazprom Export website, the Russian corporation delivered a total of 194.4 billion cubic meters (bcm) of gas to European countries in 2017, while US exporters shipped just 2.26 bcm of LNG to the continent last year.

    Western Europe continues to consume the bulk of Russia's pipeline gas at a growing pace. According to the European Commission's latest data, 37 percent of the imported natural gas comes from Russia, while Norway and Algeria account for 33 and 11 percent respectively.

    For their part, Germany and Austria have recently increased the consumption of Russian hydrocarbons: According to some estimates, Russia currently satisfies 40 percent of Germany's needs, while Austrian imports of Russian natural gas have nearly doubled in the first four months of 2018.

    US Crackdown on Nord Stream 2 May Provoke Europe's Ire

    Gazprom's Nord Stream 2 pipeline, running from Russia to Germany, is expected meet the EU's needs. However, Washington is up in arms about the project, although the US is virtually unable to offer any alternative to its European partners: The American LNG is losing to Russian gas in the terms of price and affordability.

    It appears that US attempts to bring an end to the Russian-European endeavor may become the last straw for EU member states, leaving the longstanding transatlantic alliance in tatters. The EU has already signaled its dissatisfaction with the Trump administration's tariff war and the resumption of sanctions against Iran. Washington's continuous pressure may further alienate Europe from its overseas ally, making its business offers unattractive to Europeans.  

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    Tags:
    Russian natural gas, Nord Stream 2, liquefied natural gas (LNG), Gazprom, Germany, China, Europe, United States, Russia, Asia, Austria
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