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US gas to feed battered European market

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LNG Industry,

According to the latest Bloomberg report, the European gas market may receive a helping hand from the American shale revolution as fuel is poised to replenish depleted inventories after the coldest January in seven years.

Northwest Europe, one of the biggest trading regions for the fuel, has not yet attracted any LNG cargoes from the US. So far, sellers have favoured markets in South America and Asia where prices have been higher.

But that may be about to change with spring weather poised to reduce demand and prices in the biggest consuming region of Japan and South Korea moving closer to those in the UK and the Netherlands. Supplies from the US may arrive in the coming months to help replenish European stocks at their lowest level since 2013.

As Asian demand subsides with milder weather, regional prices will move closer to parity with European rates.

Most US LNG exports have so far gone to Latin America, with cargoes also reaching Asia and the Middle East. Supplies from Cheniere’s Sabine Pass have also arrived in Spain, Portugal, Italy and Turkey at an increasing rate over the past three months. The company estimates that only 17% of US LNG went to Europe since exports started in February 2016.

Competition will come from Russia and Norway. They produce gas at a lower cost than US LNG and ship it via pipelines instead of on tankers. Russia’s Gazprom is also targeting Europe’s low inventories to help it sell a record volume to its highest-paying consumer.

It takes about two weeks to transport a cargo from Sabine Pass to France and as long as a month to India. US cargoes have no restriction on final destination, which means that companies with several supply options can ship to markets with highest prices.

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