From Oilprice, November 28:
For years, boosters of U.S. LNG have trumpeted the fact that gas
exports from the Gulf of Mexico could break Russia’s grip on the
European energy market. That has yet to be the case, and in fact, Russia
has managed to respond with various strategies to maintain its market
share on the continent.
“The United States is not just exporting energy, we’re exporting freedom,” U.S. Secretary of Energy Rick Perry said
in early 2018. “We’re exporting to our allies in Europe the opportunity
to truly have a choice of where do you buy your energy from. That’s
freedom. And that kind of freedom is priceless…There’s no strings
attached when you buy American [liquid natural gas]. So that’s
world-changing.”
That comment from Perry crystalizes conventional
wisdom in Washington. Europe relies on Russia for about a third of its
gas needs. For years, Russia’s Gazprom was able to bind various European
countries up into rigid contracts with fixed prices, often linked to
higher crude oil prices. Worse, Russia tended to negotiate bilateral
deals, and would offer preferential terms to friendly countries and
higher prices to others. These practices raised the ire of the European
Commission’s antitrust regulator, which forced Gazprom to dial back on
such strong-arm tactics.
But with few alternatives, there was
little prospect of fundamental change – Europe would still need Russian
gas for the long haul.
The most promising alternative came from
U.S. LNG. Cheap shale gas sparked a wave of investment earlier this
decade. Cheniere Energy brought its Sabine Pass LNG facility online
nearly three years ago, and several more terminals are in the works.
The mere threat of American LNG arriving in Europe arguably weakened Gazprom’s hand. Lithuania,
for instance, forced Gazprom to agree to pricing concessions when it
managed to bring in a floating LNG import terminal, opening up the door
to imported gas from places other than Russia.
Last year, the
first American LNG cargo arrived in Lithuania. “U.S. gas imports to
Lithuania and other European countries is a game changer in the European
gas market. This is an opportunity for Europe to end its addiction to
Russian gas and ensure a secure, competitive and diversified supply,”
Lithuanian President Dalia Grybauskait? wrote to Foreign Affairs at the time.
However, things have not changed as much as some had hoped. Russia’s
market share in Europe is little changed. This has occurred for several
reasons. First, very few U.S. LNG cargos have actually arrived in
Europe. Second, Russia is not sitting by watching its position erode.
Instead, it has expanded its own use of LNG and it has also redoubled
its efforts at locking European buyers into gas via pipelines....MORE
