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Page added on April 19, 2016

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American gas for Europe?

American gas for Europe? thumbnail

With the spotlight remaining firmly focussed on the UK steel industry and the UK jobs at risk, there has been much talk around the collapse in demand for steel worldwide and in turn global steel prices and the role of cheap Chinese imports.

The result has been a global culling of production capacity and the UK has not been immune.

But, in the UK, the debate is multi-faceted because what irks UK heavy industry most is the relatively high energy costs and the extent to which manufacturers feel the brunt of the green levies, both those imposed by the EU but also the UK government’s own domestic policies.

There is a parallel debate going on in the US but from a slightly difference perspective.

Thanks to shale gas, US manufacturers are benefiting from record low energy prices and their anxiety stems from a concern this competitive advantage might be put at risk by the US becoming a significant gas exporter.

All of this made the AEEC’s 3rd transatlantic summit in Washington DC earlier this month particularly timely.

Co-hosted by US law firm leClair Ryan, the summit brought together a panel of government and industry experts to debate the prospects for US natural gas exports to Europe.

Could UK consumers be heating our homes and powering our factories with cheap American shale gas any time soon?

The AEEC is a Europe-wide association of energy law firms, of which my own firm is the UK representative, and the summit alternates each year between the US capital and Brussels.

For Europeans growing increasingly used to US insularity, the tone of the discussions from the Americans this time around, and especially the representatives from the US government, was surprisingly upbeat.

The facts are stark. The US is awash with shale gas and is now the largest producer in the world which has made energy prices low and given US industry a competitive edge.

But, as I say, US industrial users, especially steel and aluminium manufacturers, are keen not to lose that competitive advantage and worry that exports will drive up domestic prices.

Nonetheless, in a hugely significant move, US energy giant Cheniere Energy has just begun exporting gas out of one of its newly built LNG terminals along the Gulf coast, albeit with the first cargo headed for Brazil.

Meanwhile, across the Atlantic, the EU imports about two thirds of the gas it uses, making it the world’s largest gas importer, with a dependency on Norwegian and Russian gas shipped by pipeline and a political desire to wean itself off what is seen as an unhealthy reliance on the latter.

The EU also imports LNG from producing countries such as Qatar and Algeria, using a network of around 20 large scale LNG import terminals along Europe’s coastline, which for various reasons (to do with renewables growth, cheap coal and higher demand and prices in Asia) are under-utilised.

So, are we all set to see US LNG get shipped into the UK’s three LNG import terminals?

Well, unlike oil exports, exports of natural gas from the US are still restricted.

Whilst environmental and construction phases of any LNG export project are subject to a lengthy Federal Energy Regulatory Commission (FERC) approval process, once that has concluded and the export facility has been commissioned, exports cannot take place without Department of Energy (DoE) approval.

DoE approval will be given only if natural gas exports are considered to be in the “pubic interest”. However, this test will be considered passed if the export licence is for export to a country with a free trade agreement.

That makes the current negotiations between the US and the EU to conclude the Transatlantic Trade and Investment Partnership (TTIP) a particularly crucial milestone for the prospect of US LNG exports to Europe.

And it also adds yet another nuance to the Brexit debate because a Brexit would leave the UK needing to conclude its own free trade agreement with the US, for all sorts of reasons but also to benefit from the deemed DoE approval so as to allow US gas shipments to arrive in the UK.

However, the key issue is probably going to be one of pricing. For European buyers, US gas must be cheaper than Russian gas and for US exporters the prices on offer in Europe must be comparable with Asian gas prices, which are currently higher.

That, combined with the fact that many of the existing LNG terminals in Europe – especially those in Spain – are not well connected with the European gas grid, means the prospect of material gas imports from the US is probably one for the longer term.

Having said that, even the future prospect of US gas imports can have a beneficial impact.

Look no further than Lithuania, which is heavily dependent on Russian gas and, in response to installing its own LNG import terminal, saw a dramatic reduction in prices from Gazprom.

It remains to be seen how aggressively Gazprom will seek to defend its EU market share, as US LNG export capacities are expected to rise significantly over the coming decade and the US emerges as a viable alternative supplier for the EU.

It will also be interesting to see if the new US administration has the stomach to get behind its European allies and act to bolster the energy security of the continent by exerting some geo-political influence as a counter-weight to Russia in its own backyard, especially with tensions still high over Ukraine.

Regardless, for UK and EU consumers, diversification of supplies and the possibility of a game-changing new entrant can only be good news for prices and for the competitiveness of UK industry – with or without a Brexit.

www.birminghampost.co.uk



44 Comments on "American gas for Europe?"

  1. Rick Bronson on Tue, 19th Apr 2016 9:24 pm 

    Gas has to be liquified and loaded into tanker ships and at the receiving end, has to be regasified to be used and this results in some loss of energy.

    Instead Europeans can import it from Russia directly thru pipelines.

    Meanwhile the US natgas can be directly used to power the vehicles.

  2. makati1 on Tue, 19th Apr 2016 9:25 pm 

    The US exporting LNG to Europe? Only at a much higher cost than if they buy it from Russia. IF it ever happens.

  3. paulo1 on Tue, 19th Apr 2016 9:28 pm 

    What a great idea…US producers (while the US is still a net importer of NG) plan to sell off some of its production thus driving up the costs for domestic users. Might as well continue this Globalization meme, (as if people aren’t pissed off enough, already). Maybe you can sell the grandkids and replace them with immigrants.

  4. makati1 on Tue, 19th Apr 2016 9:36 pm 

    Hahahahahahahaha…

    “Sell the grand kids and replace them with immigrants”

    I thank you for the laugh, Paulo1. An original idea that some here might consider … except Theedrich. For some, it’s ALL about money.

  5. yellowcanoe on Tue, 19th Apr 2016 9:46 pm 

    The title should be “Canadian Gas for Europe”. The US is a net importer of natural gas so any gas they export will have to be replaced with more imports from Canada.

  6. dissident on Tue, 19th Apr 2016 9:47 pm 

    Instead of bitching about it, they should just do it. Believe it or not, Russia would prefer for some other party to take this precious market. It would give it a way to extract itself without NATO starting WWIII on account of Russia “cutting off the gas”. Russia can afford to lose a few billion dollars in exports. China will cover most of the revenue anyway when the pipeline links are completed by 2019.

  7. brough on Wed, 20th Apr 2016 3:04 am 

    Here in the UK we already import US Ultra light crude/condensate.

    Back in 2012 PM Cameron had to pull the ‘special relationship’ card with Obarma in order to maintain production at Eineos’s giant petrochemical plant in Grangemouth, Scotland.

    We have a highly developed grid for natural gas distribution with over 87% of the population relying on it to keep warm in the winter. But it will have to be 99% pure methane to be compatiable with the grid. There maybe potential for lower purity gas in the future for electricity generation.
    As for the rest of Europe it’s a energy/geopolitical basketcase which I don’t think the US should get involved in.

  8. simonr on Wed, 20th Apr 2016 4:34 am 

    brough – You stated the rest of the EU is an energy basket case.

    I assume you can back this up ?

  9. rockman on Wed, 20th Apr 2016 7:03 am 

    “The facts are stark. The US is awash with shale gas and is now the largest producer in the world…” And the real “stark fact”: while the US exports NG to a number of countries it is still a net NG importer because the country is still the largest consumer on the planet. And one more “stark fact”: last time I looked the US was also a net LNG importer. The export of US NG (as well as US oil exports that have been going on for many decades) has been driven by economic considerations and will expand or contract on that basis. That factor and free trade agreements will control the situation.

  10. brough on Wed, 20th Apr 2016 8:06 am 

    In reply to simonr

    I did write Europe not just EU and its also geopolitical. Mainland Europe is so dependant on Russian NG, there are so many other parameters for national politians to consider to keep the gas flowing, other than price. Such as keeping a noisey neighbour quiet.

  11. simonr on Wed, 20th Apr 2016 8:12 am 

    brough

    the energy mix for natural gas dependency varies dramatically from country to country.

    The ones that depend on Russian gas do so, because of cost, if the US exported gas it would be more expensive than Russian gas, by the time it got here so why buy it ?

    the UK is dependent on Russia for Cheap gas and the EU for allowing transit. The UK could easily break itself of these ‘habits’ however, would the consumers be willing to pay the cost.

    As we (EU) are entering ISEM then Russian energy will be competing with the rest.

  12. brough on Wed, 20th Apr 2016 8:23 am 

    In reply to rockman

    Yes both shale gas and shale oil production yields vast quality of C2-C10 molecules which are useful as petrochemical feedstock and can be burnt to generate electicity. But in the UK we want C1 molecules to feed into our grid system. Is this why the US is still an importer of LNG ? And what are we going to do with all this short chain stuff?

  13. brough on Wed, 20th Apr 2016 9:30 am 

    In reply to simonr

    Yes I agree in the UK we are dependant on Russian gas, although I have heard it argued that we are anything but. Norwegian, Dutch, Denmark, LNG etc. I am worried that we are ever increasing our dependancy on NG for generating electricity and although the US has plenty I’m not sure it’s up to the required quality. Certainly the stuff they’re pouring into the atomosphere at Aliso Canyon, Cal, isn’t, because its 8% ethane + other longer chain.

  14. GregT on Wed, 20th Apr 2016 10:39 am 

    “The facts are stark.”

    They most certainly are.

    We have far more than enough fossil fuels reserves left on Earth to render the planet inhospitable to all life as we currently know it. We are presented with an opportunity to use these reserves to build out alternate energy infrastructure, and to rethink our relationship with the one thing that we will not survive without. A healthy natural biosphere. Instead, we continue to squander these resources in exchange for little pieces of paper with pictures of mostly dead politicians on them, to be hoarded by the few, at the expense of everything that ever really mattered. Life itself.

    Maybe in a few million years from now a species will evolve with real intelligence. For the time being, that species would not be us.

  15. rockman on Wed, 20th Apr 2016 10:57 am 

    brough – Actually most US NG production is C1…pure methane. And what production containing larger chains is typically stripped before the NG is delivered to end users. I

  16. Anonymous on Wed, 20th Apr 2016 11:56 am 

    The american homeland still consumes more NG than it produces, end of story. Sure, tiny, insignificant quantities could exit the empires borders under certain conditions, does not change anything. The uS has annoying habit of declaring\counting Mexican and Canadian NG as ‘amerikan’. With some justification I suppose, as both of those countries are de-factor energy and political colonies of the empire with little say or ownership of their own resources, NG or otherwise.

    The underlying idea that the uS empire will ‘save’ Europe from the ebil Putin and his equally ebil Russian NG, is a fantasy. The uS should stop expending energy(or other peoples energy lol), on ‘wars’ they cant win and should not be waging in the first place. Its just a new cold-war mentality, but this time applied to energy as the ‘battleground’. Since the uS knows its fat, lazy incompetent troops couldn’t win an actual shooting war against Russia, Energy wars are the current favored tactic of the amero-zionist empire.

  17. rockman on Wed, 20th Apr 2016 12:08 pm 

    brough – Actually most US NG production is C1…pure methane. And what production containing larger chains is typically stripped before the NG is delivered to end users. I might not strip them at my wellhead but the marketing folks I sell to will do it at their major gas plants. If I don’t strip the heavies I get paid a bit more for the “Btu adjustment”. As far as I know all LNG is typically almost 100% C1. Alaskan LNG is 99.7% methane, NYC is 98% methane. But Algerian LNG is 87% methane and about 10% ethane. Remember the big gain in recent years in US NG production has come from the Marcellus Shale. And it’s typically around 94% methane. And compared to the Eagle Ford and Bakken the M is fairly dry. But even the heavies are seldom bigger than C4…butane.

    Essentially our power plants and end users all burn “dry gas”…pure methane.

  18. Bob Owens on Wed, 20th Apr 2016 2:44 pm 

    Port Ambrose in NY was killed in December of 2015, when Governor Cuomo vetoed it, following a two-year campaign by a coalition of advocates led by Sane Energy Project and allies in NYC and Long Island, that included a successful push for the New York City Council to pass a resolution against it. A windfarm may be replacing it. LNG just has too much baggage to be successful. 1/3 of the gas is wasted in liquification and re-gasification. A huge amount of money is required to finance an LNG plant. A huge, cheap supply of gas is needed (think a 20 year supply). The receiving country must be willing to pay a high price and not have any alternatives. And last, someone with a high-powered rifle can blow up one of these tankers and the city it is entering (like Boston). Compared to a windfarm LNG is makes no sense at all. It is already dead and doesn’t know it. Time to go wind/solar and stop dreaming.

  19. rockman on Wed, 20th Apr 2016 3:45 pm 

    First, wind farms (like all the big ones we have in Texas) are great but they don’t produce NG so they aren’t a substitute. And banned or not I doubt an LNG import terminal would have ever been built to serve NY: they’ll be getting all the NG they’ll need for a while from the Marcellus Shale in PA where frac’ng hasn’t been banned…unlike in NY state. In fact the NY state has been doing what it can to expedite NG pipeline construction to haul NG from PA. I don’t see how the Port Ambrose project could have ever been considered economic.

    And besides there are no wind farms serving NY the last time I looked. Maybe someday…maybe not.

  20. Boat on Wed, 20th Apr 2016 7:18 pm 

    Not mentioned was the new nat gas pipeline to Canada and two others to have lines reversed. US nat gas is expected to become a net exporter this year.

  21. GregT on Wed, 20th Apr 2016 8:37 pm 

    Canada is a net natural gas exporter Boat. The US is Canada’s biggest export market.

    https://www.neb-one.gc.ca/nrg/sttstc/ntrlgs/index-eng.html

    Come to think of it, why does anybody bother providing links for you? It’s crystal clear that you aren’t the least bit interested in learning anything, if it’s even possible.

  22. Boat on Wed, 20th Apr 2016 9:20 pm 

    gregt

    http://business.financialpost.com/news/energy/more-pain-for-canadas-natural-gas-producers-u-s-drillers-ready-to-pounce-and-reverse-flow-northward?__lsa=a7f1-7aa0

    http://www.albertaoilmagazine.com/2016/02/marcellus-shale-play-could-spell-the-end-for-canadian-natural-gas/

    Read and learn.

  23. GregT on Wed, 20th Apr 2016 10:04 pm 

    Natural Gas Imports and Exports Third Quarter Report 2015

    Prepared by:
    U.S. Department of Energy
    Office of Fossil Energy
    Office of Oil & Natural Gas
    Office of Regulation and International Engagement Division of Natural Gas Regulation

    Third Quarter 2015 Highlights

    U.S. imports totaled 657.8 Bcf and U.S. exports totaled 451.3 Bcf, resulting in net U.S. imports of 206.6 Bcf. Most of the imports came from Canada, comprising 96.3 percent of the total. U.S. imports from Mexico and LNG imports by vessel from Trinidad and Tobago made up the remaining 3.7 percent of total imports.

    Third Quarter 2015 vs. Second Quarter 2015 – Highlights

    As illustrated in the tables in Section 1, total imports increased by 3.3 percent compared to last quarter. Pipeline imports from Canada increased by 0.7 percent, while pipeline imports from Mexico also increased by 8.1 percent

    Third Quarter 2015 vs. Third Quarter 2014 – Highlights

    Total U.S. imports were up 3.9 percent from the third quarter of 2014. Pipeline imports from Canada increased 2.4 percent, pipeline imports from Mexico decreased 31.2 percent (although from a small base), and LNG imports by vessel increased 75.5 percent.

    US nat gas imports have actually been increasing, not decreasing, despite the ‘Mighty’ Marcellus and cheap NG prices.

    Your above articles were originally posted by Bloomberg Boat, and are both speculative articles on what could happen by 2017/2018. In other words, now would be a very good time for you to invest
    in US Natural Gas production. Couldn’t lose much more than the S&P 500, now could it?

  24. GregT on Wed, 20th Apr 2016 10:20 pm 

    Link:

    http://energy.gov/sites/prod/files/2016/02/f29/3Q2015_1.pdf

  25. Boat on Wed, 20th Apr 2016 10:38 pm 

    gregt,

    So you don’t believe the pipelines will be reversed? You don’t believe Canadian consumers want cheaper prices?

    Ps, the US stock market is near an all time high.

  26. Apneaman on Wed, 20th Apr 2016 10:47 pm 

    Boat, how about a pipe line straight to your lungs? Oh ferget it, that’s already covered.

    More than half US population lives amid dangerous air pollution, report warns
    American Lung Association’s ‘state of the air’ report finds 166 million Americans are living in unhealthy ozone or particle pollution with serious health risks

    http://www.theguardian.com/environment/2016/apr/20/dangerous-air-pollution-us-population-report?CMP=share_btn_tw

    When we were kids we had those PEZ candy dispensers. That’s what all the kids I see with those asthma puffer remind me of. Fuckin hell they are everywhere. Bet the candy tastes better. I been smoking cigarettes for almost 35 years and I don’t need no puffer. Today’s kids been poisoned since they were in the womb. There’s your progress.

  27. antaris on Wed, 20th Apr 2016 10:52 pm 

    Boat we pay a 32ish % premium to buy US product, we have lots of our own and their are a lot less Canadians freezing asses in the winter than Americans. Does it make sense to you to reverse a pipeline ?

  28. Boat on Wed, 20th Apr 2016 10:58 pm 

    Antaris,

    Capitalism, lowest cost producer gains market share while making more money. Just the way it is.

  29. GregT on Wed, 20th Apr 2016 11:03 pm 

    I believe that the pipelines will be reversed as much as I believed that the US was about to become energy independent.

    Not sure about where you are, but nat gas is dirt cheap here right now.

    The US stock market is in the MOAB (mother of all bubbles) Boat, due to central bank policies, and a stagnant economy. Even you have admitted that it is due for a rather large correction.

    If you’re still in, the trick is to know when to get out. Bet you don’t.

  30. Boat on Wed, 20th Apr 2016 11:20 pm 

    gregt,

    As always the future will tell the story. The Marcellus is the biggest nat gas story going.

  31. makati1 on Wed, 20th Apr 2016 11:23 pm 

    Maybe the biggest lie, Boat, but you want to believe lies. It makes you fell safe.

  32. Boat on Wed, 20th Apr 2016 11:46 pm 

    mak,

    I feel bad for all the drilling crews the oil glut and the nat gas glut has caused. I feel bad for coal miners that have lost their jobs. But life goes on and continually evolves.

  33. GregT on Wed, 20th Apr 2016 11:53 pm 

    “Production in Pennsylvania and West Virginia (two states with Marcellus production) increased substantially from December 2015 levels, offsetting production declines in other areas, particularly in Texas. EIA survey data have shown some production flattening on a national level, and EIA projects relatively low production growth through most of 2016, as low natural gas prices and declining rig activity begin to affect production.”

    “EIA expects growth in U.S. natural gas production through 2017 to reduce demand for natural gas imports from Canada.”

    The US is still expected to be a net importer of nat gas Boat, not a net exporter.

    https://www.eia.gov/forecasts/steo/report/natgas.cfm April 2016

  34. GregT on Thu, 21st Apr 2016 12:06 am 

    And, Canada will continue to be the leading exporter of natural gas into the US. Almost 1/3 of all nat gas in the USA is imported from Canada.

  35. Boat on Thu, 21st Apr 2016 1:31 am 

    The eia has 2017 as when exports exceed imports. And yes the US will continue to import from Canada. Never said they wouldn’t. I will try to find the article projecting 2016.

    https://www.eia.gov/forecasts/steo/data.cfm?type=figures

    http://www.eia.gov/naturalgas/monthly/pdf/ngm_all.pdf

  36. GregT on Thu, 21st Apr 2016 10:04 am 

    I can find no reference in those 2 links to the US becoming a net exporter of nat gas Boat, and I’m not about to dig through some 300 pages of reports to find one.

    The article that I linked above is from the EIA at the beginning of April 2016, IOW 3 weeks ago.

    https://www.eia.gov/forecasts/steo/report/natgas.cfm April 2016

    In their words again:

    “EIA expects growth in U.S. natural gas production through 2017 to reduce demand for natural gas imports from Canada.”

    AND again:

    “Production in Pennsylvania and West Virginia (two states with Marcellus production) increased substantially from December 2015 levels, offsetting production declines in other areas, particularly in Texas. EIA survey data have shown some production flattening on a national level, and EIA projects relatively low production growth through most of 2016, as low natural gas prices and declining rig activity begin to affect production.”

    If you have different information from the EIA, then they are in contradiction with themselves.

    Please supply quotes and links. Thanks.

  37. PracticalMaina on Thu, 21st Apr 2016 10:09 am 

    I am about to start exporting biogas from my Boat bullshit bioreactor.
    Our biggest coal producers have filed for chapter 11, I do not think it would be wise to export any gas when our demand is set to increase.

  38. Boat on Thu, 21st Apr 2016 11:38 am 

    PracticalMaina,

    If you knew anything about natgas you would know over 1200 US drilling rigs have been taken offline because of a glut. World prices have also dropped dropped dramatically as new finds work into the system.
    If you don’t know why coal is in trouble get out from underneath that rock and read.

  39. Boat on Thu, 21st Apr 2016 11:53 am 

    Europe is expected to be a big market for American gas. The shale-gas boom has transformed the energy landscape in the U.S., and the country is now expected to become a net gas exporter in 2017.

    http://www.wsj.com/articles/first-u-s-gas-shipment-en-route-to-europe-1461253153

    The U.S. will be exporting liquefied natural gas (LNG) abroad due to an expanding resource base, increasing production, and higher prices in outside markets. Despite lower prices, “the shale revolution” will help output climb this year for the 11th straight time, rising 2% to a new record of over 81 Bcf/day. The U.S. will become a net exporter of gas this year or next.

    http://www.forbes.com/sites/judeclemente/2016/01/10/world-benefits-from-u-s-liquefied-natural-gas-exports/#617b05512b71

  40. PracticalMaina on Thu, 21st Apr 2016 12:01 pm 

    Those rigs came off because the scheme is up, a billionaire offs himself, its a big deal. Coal is in trouble because of cheap natgas and also because the largest mines out west are not as profitable as they want you to think. Gregt had a great quote from a peabody exec saying the mines were not profitable back in 2013, and those mines are some of the very same that are touted as the most efficient in the world. Hint, using a shitload of oil to produce something worth less than sand is not profitable. The price of every commodity has fallen because the economy is in turmoil. Natgas drilling should be cracked down on due to leakage, steep decline rates, producers losing money.
    Do you trust everything Forbes writes? Especially when banks are all so damn exposed to cheap fossil fuel..cmon

  41. PracticalMaina on Thu, 21st Apr 2016 12:06 pm 

    Canada needs that gas for tarsands, we need it to replace coal, everyone needs it to backup renewables. Steep decline rates, poor business models (basing exec bonuses on production not profit) drilling of sweet spots, damage to the climate from leaking gas, I mean Obama already had to get the EPA out of the way and pretty much give drillers a free pass to destroy ground water…The future is not as bright for natgas as you think.

  42. GregT on Thu, 21st Apr 2016 7:31 pm 

    Obama was brokering a deal with the EU promoting US nat gas at the same time that the US state dept was busy fomenting civil war against ethnic Russians in Ukraine.

    http://www.theguardian.com/world/2014/mar/26/europe-asks-obama-increased-exports-shale-gas

    https://en.wikipedia.org/wiki/2014_pro-Russian_unrest_in_Ukraine

    2 months after Victoria Nuland’s speech talking about investing 5 billion US dollars to open up Ukraine to foreign industry. Note the Exxon Mobile and Chevron banners on the stage.

    https://www.youtube.com/watch?v=2y0y-JUsPTU

  43. GregT on Thu, 21st Apr 2016 7:34 pm 

    “Europe is expected to be a big market for American gas.”

    Yup, profits for the few, at the expense of the many, once again. The American gas that will be exported, is the same gas currently being used for domestic consumption, and a good percentage of that gas is imported from other countries. Mainly from Canada.

  44. GregT on Thu, 21st Apr 2016 7:46 pm 

    Still waiting for quotes and links Boat……….


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