Europe looks to barge into America's cheap natural gas
By LIAM DENNING
Like the truth, US natural gas will come out -- provided Washington doesn't block it.
US natural gas trades for a little over $3/MMBtu, while in Europe the price is closer to $12. A supply boom coupled with a lack of export options has kept gas prices low in America. Europe, meanwhile, depends on imports from countries, such as Russia, that demand prices linked to those of oil, which is relatively expensive.
Cheap stuff attracts buyers, and gas is no different. French utility EDF has announced plans to develop floating barges that could liquefy North American gas to be shipped overseas. In theory, this could offer a cheaper, faster way to get US gas on the high seas than some land-based projects.
That remains to be seen. The bigger point to draw from this move is that Europe needs cheaper energy, and its companies are getting creative in how to tap it. In December, Austria's Voestalpine announced plans to build a facility in North America to use cheap gas to make a precursor to steel that will then be shipped back home for final processing.
Europe needs the help. Its power stations are burning more US coal these days, which has been displaced by cheap gas at home. That helps with costs but does nothing for Europe's carbon emissions targets.
Alistair Buchanan, who runs the UK's energy-market regulator, warned again this week that the country's reliance on imported gas to power its electricity grid looks set to intensify, raising energy bills.
Meanwhile, Jonathan Lane of research firm and consultancy GlobalData calculates that German residential consumers last year paid more than 2.5 times what Americans paid for electricity. High renewable subsidies in Germany are a big part of this, but the cheaper underlying cost of gas-fired power also gives US bill-payers an advantage.
Exporting US gas to Europe, undercutting the likes of Gazprom, is a no-brainer from the market's perspective. The question is whether US politicians allow much of it. For them, a gas glut at home means less inflation and a basis for more competitive manufacturing.
Even if EDF and friends build their barges, they may struggle to find a welcoming dock.
Dow Jones Newswires