US LNG exports to Europe set to surge
Friday, Apr 28, 2017
Evidence continues to emerge of a future surge in US LNG exports to Europe.

2016 saw a continued recovery of European LNG imports, up by 900,000 tonnes compared to 2015 levels, including US-originated LNG, and reflecting higher imports into Spain, France, Italy and Portugal.

Wood MacKenzie has predicted in a recent report that as much as 60% of US LNG exports may be channelled towards European markets within the next two decades.

Sabine Pass LNG started LNG exports to Europe last year, with Spain’s Mugardos LNG import terminal among the first to receive a cargo during 2016.

Cheniere-owned Sabine Pass LNG will soon introduce Train 2 and the energy group will also start up Corpus Christie LNG later this year. So its sales volumes in the transatlantic market are certain to rise. Other US LNG export projects coming into the market include Cove Point LNG, Sempra Energy’s Cameron LNG and Kinder Morgan’s Elba Island LNG.

Although these projects were originally thought most likely to target Asian end-users, and some indeed have Japanese shareholders, the trend appears to be shifting quickly towards a much greater interest in supplying European markets.

There is also a growing perception that Australian LNG exporters are winning the race to supply Asia with LNG, and that US exporters will have to change strategy and broaden the potential customer base once they are up and running.

Demand for gas in Europe will certainly rise, driven by a steady switch of power generation methods from coal-fired to gas-fired, demand for LNG from the transportation sector, and a general desire to achieve some degree of balance against any dependence on Russian gas supply.

It will be fairly easy to ramp up LNG imports to Europe. Utilisation rates at European terminals are still quite low, and this leaves plenty of scope for growth.

This spare capacity means that US LNG producers will see a clear route to the market emerging from these features.

As well as long-established LNG import terminals stepping up their imports, newly opened capacity such as Dunkirk LNG and Poland’s Swinoujscie LNG are typical examples of new players which will help to drive European demand for LNG of US origin.

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