BY ISIS ALMEIDA and ANNA SHIRYAEVSKAYA
US exports of liquefied natural gas wont be able to
replace Russian exports to Europe as the Ukrainian crisis
threatens to disrupt flows to the region.
US LNG supplies expected to start in the first quarter of
2016 wont be enough to compensate for Russia supplies
that meet about 30% of Europes gas needs, said Jean
Abiteboul, president of Cheniere Supply & Marketing. US
LNG exports wont have any bearing in the current
conflict and deliveries will likely target higher price
markets in Asia, said Will Pearson, director for global
energy and natural resources at consultant Eurasia Group.
You cannot replace Russian gas with any kind of LNG,
especially by US LNG only, Abiteboul said in an
interview at the Flame conference in Amsterdam. It will
probably force people to think more accurately on the
diversification of supply, security of supply and not only
price and could give an additional chance for LNG imports
, including US.
The European Commission, the 28-nation blocs executive,
will by June prepare a road map on how to cut reliance on
Russian imports and increase security of supply as tensions
between Russia and Ukraine escalate. About half of
Russias gas exports to Europe are carried through
pipelines crossing Ukraine. Disputes between the two nations
disrupted supplies of the fuel to Europe in 2006 and 2009.
Houston based Cheniere Energy Sabine Pass terminal is the
only facility in the lower 48 states to obtain a full U.S.
US LNG and alternative supplies such as the Shah Deniz project
in Azerbaijan are unlikely
to come to Europe after UK gas prices on the National
Balancing Point fell 36% this year and freezing weather
boosted US futures on the Henry Hub by 6.8%, said Thierry
Bros, an analyst at Societe Generale. UK prices need to be at
Henry Hub plus $6/MMBtu for the arbitrage to work, he said in
UK next-month gas rose fell 0.9% to 43.99 pence a therm
($7.39/MMBtu) on Londons ICE Futures Europe
exchange, the lowest level
since September 2010. The comparable US contract was little
changed at $4.47/MMBtu.
Europe can do things, but I dont think US exports
or global LNG is a panacea for Europe, said Andrew
Walker, head of LNG strategy at BG Group. If Europe
needs LNG, it has the infrastructure, it has an option to
pull global gas. The trouble is that global gas is more
expensive than Russian gas.
The global impact of future LNG exports has already started,
Abiteboul said at the conference, citing US coal exports to
Germany, price reviews in Europe and pressure on prices in
Asia linked to the Japan Crude Cocktail marker. US LNG
exports to Europe are profitable versus current oil linked
gas prices, he said. Gazprom sells most of its gas to the
region under long term contracts at prices linked to oil, in
a system that has been challenged by buyers including RWE,
Germanys second-largest utility.
Gazprom billed Ukraine for 114 million cubic meters of gas a
day in June, or about $1.66 billion, assuming a price of $485
a thousand cubic meters charged since April. Supplies will
stop on June 3 unless Gazprom receives some payment by June
2, according to Sergei Kupriyanov, a spokesman for Gazprom.
Russia is boosting gas supplies to Europe to kill
competition from potential new project
s before they even start,
Bros said. They also want to have European storages filled in
case of a supply disruption to Ukraine, he added.
Gazproms gas exports to western Europe were at 448
million cubic meters on May 15, up from 425 million at the
beginning of the month, according to data from the Russian
Energy Ministrys CDU-TEK unit.
Its a matter of political willingness, its
also a matter of costs and my guess is that in the end is
that Russia will continue to play a very important role in Europe
especially if the crisis in
Ukraine finds a peaceful solution, Abiteboul said.