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