Will the U.S. be able to compete with Russian natural gas in the lucrative European gas market? For those who think that Washington's support of Ukraine is about energy, this may warrant another look. The U.S. is far from ever becoming a major supplier.
I used to think that the U.S. was positioning itself to be a big supplier of liquefied natural gas to the European Union. And with that came the lobbying against Russia's
Gazprom will naturally lose some of its market share in Europe over time. Such is the ebb and flow of a free market. But it won't be at the expense of Washington policy makers, or the Gulf of Mexico.
There is only one way domestically produced gas can get to Europe and of course that is by LNG tanker. The U.S. is building up LNG port terminals. There are currently four LNG export terminals under construction, with an additional one scheduled to start shortly.
The bulk of them are in the energy rich Gulf Coast. One is in Washington's backyard -- in Maryland. Most of the capacity for these five terminals has been contracted to identified buyers already, some of which is not dedicated and will likely sell on the open market to the highest bidder. Others have destination specific contracts. The contract holders are a matter of public record, and most of the export facilities have their "sales and purchase agreements" on their project websites. Of the five terminals under construction, only Corpus Christi has signed contracts targeted for Europe.
According to the U.S. Energy Information Administration, that terminal will ship the equivalent of around 700 million cubic feet per day to Europe. Bigger contracts have been signed with India (1.8 billion cubic feet daily) and Japan (2.2 bcf/d).
Even though U.S. energy firms are building for future exports, Europe does not appear high on the list.
More than 30 projects totaling 40 bcf/d in export capacity have been proposed in the U.S. but have not yet been approved, so for now these are pipe dreams. If they became reality, they would account for more than the current global liquefaction capacity, which was 39 bcf/d in 2013, according to data from
Washington is more interested in lowering U.S. dependence on foreign fuels than it is interested in helping the E.U. diversify away from its main foreign source of fuel, which happens to be Russia.
Russia, the U.S. and the E.U. have been butting heads over Ukraine since the March 2014 annexation of Crimea, a peninsula in the Black Sea. The Kyiv government has been moving westward ever since and pro-Russia separatists in the east have been moving, well...eastward, towards Moscow. The dispute has led to sanctions against Russian energy firms like Gazprom, Rosneft and Lukoil. It has also led to a cooling-off of U.S.-Russia relations.
When President Barack Obama was elected, the idea was for Washington to "reset" relations with Russia. They have been reset alright, all the way back to the 1980s, at least in politics.
One of the sticking points is energy.
Russia proposed including Greece in its Turkish Stream pipeline deal. Greece accepted the offer. It will turn Greece into a key transit hub for Russian natural gas flowing through Turkey and into southern Europe via cash-strapped Greece. But last week, the Greek government said it was being courted by Washington in a counter offer.
Most of this is just political posturing and noise. The U.S. is not now and nor will it be in the near future a key resource for Europe's energy needs.
According to EIAs Annual Energy Outlook, published in April, the United States remains a net importer of fuels through 2040 in a low oil price scenario. In a high oil and gas price scenario, the United States becomes a net exporter of liquid fuels due to increased production by 2021. A lot can happen in seven years. By then, Exxon will likely be back to its deal with Rosneft in Russia's Arctic Circle.
American natural gas will be for Americans.
Gazprom, meanwhile, might go from 30% of the European Union's current foreign supply to 25% or even 20%. Some of that might be replaced by the U.S. But the real competitors are the European Arctic Circle producers who, for the most part, have good relations with the Russians.
For those of us who like to think that wars in foreign lands are due to oil and gas dealings...if Washington plans on kicking Russia to the curb in its own backyard, it has a lot of work to do. And a long way to go to achieve it.
Russian exports are also on the wane, surprisingly.
The U.S. is not a major exporter today. All of our LNG is shipped out of a small facility in Kenai, Alaska which was shut down for a year. According to the EIA, the last LNG vessel to leave Alaska was in October 2014, with 2.8 billion cubic feet bound for Japan.
