Europe has been ramping up imports of US LNG.
On the latter's side, liquified natural gas and other natural gas exports rose sharply in August, according to ÚS government data released Thursday, particularly to European nations facing a rapidly approaching winter with an insufficient supply from Russia almost guaranteed.
And it’s interesting to know that while natural gas exports to France are up 421% through the first eight months of 2022, the value increased 1,094 percent in August alone!
A similar story can be told for Croatia, where imports are up 281% through August but 1,195% in August; Poland, which is up 505% YTD and 817,000% in August; and the United Kingdom, up 216% YTD and 6,797% in August.
French Economy and Finance Minister Bruno Le Maire on Monday said that Europe should not become subject to American “domination” as it becomes increasingly dependent on US LNG.
“We cannot accept that our American partner sells its LNG at four times the price at which it sells it to its own companies”, Le Maire said, while calling for a “more balanced economic relationship on the energy issue between our American allies and the European continent”.
France shouldn’t complain. Actually, the LNG market is being influenced by soaring prices in Europe. Strong natural gas demand has pulled natural gas inventories to a relatively low level. Fear often causes the oil and gas markets to overshoot.
Besides, the price of LNG from the US is at least 30-40 percent higher than Russian pipeline gas – and that is an inescapable reality.
Le Maire (left) should zip his mouth and just pay the price because France and the rest of Europe brought it upon themselves.
You can expect the US to be happy about it because it is raking in massive profits at the expense of its so-called friends in Europe.
Like it or not, US LNG will continue to play a crucial role in Europe’s gas supply. But it won’t be enough to avoid a major squeeze over the next three years.
A recent study by Rystad Energy and funded by the American Petroleum Institute and the International Association for Oil & Gas Producers found that US producers will remain the biggest LNG suppliers to European countries over the long term. But before the market rebalances, there will be a supply gap lasting until somewhere between 2023 and 2025. Meaning, the US cannot fill the gap left by a drop in supply from Russia.
The gap will be prompted by the assumed cut-off of all Russian gas supplies – something that European countries have stated they will aim for – and growth in US LNG export capacity. Noted that export capacity will be growing in Qatar (a non-OPEC member) too.
Although there are non-Russian options for more pipeline gas, such as Norway, Azerbaijan, and Algeria, the Rystad study assumes that LNG will reign supreme as the main source of natural gas for Europe, coming to satisfy half of its demand by 2030.
Already, the European Union’s gas import bill has swelled to ten times the usual for filling up winter storage sites because of the switch to LNG from pipeline gas. It’s worth noting that all that LNG was bought on the spot market, given that Brussels has been a fan of spot markets for years.
Of course, US producers are happy to sell their liquefied gas on the spot market, where it fetches prices that just a couple of years ago would have been unthinkable. Media have even reported about cases of diverting cargos of LNG meant for Asia to Europe because of the Europeans' willingness to pay a premium to get the gas.
While this year, such behavior is perfectly understandable as European countries scramble to stock up on gas for the winter, over the longer term, it would not exactly make economic sense.
European industries are already struggling to remain profitable amid soaring energy bills. Yet many of them are too busy fighting for survival to bother about profitability, which should sound the alarm to governments and motivate a more comprehensive diversification of gas deliveries.
Based on the Rystad research, Europe is essentially replacing one big supplier – Russia – with another big supplier – the United States – which can hardly pass for diversification.
Sanctioning Russia is causing Europe to go into economic, political and social convulsions. You asked for it, Europe!