Baku, Azerbaijan, Jan. 27
By Aygun Badalova - Trend:
The US could become one of the world's largest LNG exporters for at least a couple of decades, Peter Hartley, professor of economics at US-based Rice University believes.
"I do not believe that it will overtake Qatar or Australia during that time frame, but it will be a close third," Hartley told Trend.
He added that it will certainly provide effective competition for Qatar in the LNG import market into Europe, and for Qatar and Australia for the LNG import market into East, and perhaps a lesser extent South Asia.
In the case of Europe in particular, Hartley believes, US LNG will also have to compete against pipeline gas imports.
Currently, five LNG export terminals with a combined planned capacity of 99 bcm per year are under construction in the lower forty-eight states and most of this capacity is scheduled to be operating by 2018.
The International Energy Agency (IEA) expects most of the US capacity to be online by 2020, which will make the US the world's third-largest LNG exporter, behind Australia and Qatar.
Most of the capacity that will be available to export from US LNG terminals by 2018 is already contracted to customers.
European customers have committed to purchasing US LNG volumes equivalent to 30 percent of the capacity of the first four new LNG export terminals, the report said referring to the International Energy Agency (IEA).
The main advantage LNG has in that competition is the increased desire of many EU nations to have a reliable source of natural gas independent of Russia, according to Hartley.
"This is partly for geopolitical and strategic reasons. However, as the example of Lithuania shows, there are also economic motivations," Hartley said.
"Merely by creating an alternative source of natural gas imports, Lithuania was able to obtain lower prices from Gazprom since it substantially lessened the monopoly power of Gazprom. I can see other countries in Eastern Europe in particular drawing lessons from the Lithuanian example and also establishing their own LNG import terminals to change the "game" with Gazprom," he added.
Having said that, Hartley does not think that the volumes of LNG actually imported will be high. He said the main advantage comes from establishing the alternative.
"If Gazprom reacts by lowering prices, it will be able to retain most of its market share and the actual imports of LNG will remain low except if there is a "crisis" (for example as a result of political events, severe weather, or a breakdown in compressors on the pipelines from Russia)" Hartley said.
The other main part of Europe where LNG will be more competitive is on the western coast, according to the expert.
"First the transport costs for the LNG will be lower there, so the landed price can be slightly lower. More importantly, however, those locations are more remote from Russia, so the delivered cost of pipeline gas is higher. Western European coastal locations are also where the US exporters will face the most competition from Qatari (and African and Trinidad) LNG," Hartley said.
He believes that US LNG may also play an important role in satisfying seasonal swings in demand for natural gas in Europe.
'In effect, the US has much more storage than Europe and US LNG exports will be able to satisfy peak winter demands in Europe - especially given the short term/spot market focus of US LNG exporters," Hartley said.
"In summary, while the US will become a major exporter of LNG, it probably will not become a major supplier of natural gas to Europe - just an important strategic, marginal supplier," Hartley added.
According to the latest report of Atlantic Council's Global Energy Center and Dinu Patriciu Eurasia Center, new supplies of LNG from the US will expand diversification of energy sources in markets abroad, enhance competition, and in several cases, notably in Europe.
In 2014, the EU imported 45 billion cubic meters (bcm) of LNG, or 13.5 percent of its total gas imports, down from 14 percent in 2013 and 19 percent in 2012, as pipeline prices became more competitive.
The potential for higher LNG imports to Europe is immense, according to the report. Total capacity to import LNG into the EU is 197 billion cubic meter, leaving 152 bcm of existing unused re-gasification capacity for additional imports.