There’s a natural gas price war looming in Europe, and it has everything to do with cargoes of liquified natural gas (LNG) being loaded onto ships in Louisiana, across the Atlantic. Russia’s state-owned gas company Gazprom is fighting tooth and nail to maintain a grip on its most important market, but just as is the case with oil, the world is awash in natural gas at the moment. Gazprom already has a history of competing with Norway—the world’s third largest natural gas exporter—for customers in Europe, but as Europe continues to build out its LNG import infrastructure, the fight for the European market is becoming a global one. Bloomberg reports:
Europe’s two biggest gas suppliers provided a record amount of [natural gas] in the first quarter, according to Societe Generale SA. The glut discouraged cargoes of U.S. liquefied natural gas and contained growth of imports from Qatar. […]
Russia and Norway have been dominant suppliers to the region since the first pipelines were laid more than four decades ago. Their combined first-quarter shipments rose 18 percent from a year earlier, according to Bloomberg calculations based on data from Gazprom and Gassco AS, Norway’s network operator. Together they provide more than half the region’s natural gas, according to lobby group Eurogas. […]
“They are trying to defend market shares because they see — like everybody else — that failure to do so is going to allow more LNG — not just U.S. LNG but any LNG — to displace their pipeline supplies,” Jonathan Stern, chairman of the gas research program at the Oxford Institute for Energy Studies, said by e-mail. “European utilities are winning because this is the surplus cycle and prices look like they will go even lower as we approach the summer.”
The U.S. isn’t the only reason the global LNG market is oversupplied at the moment. Sluggish demand has combined with surging supply from Qatar and Australia to drive spot prices down in regional markets around the world, most notably in Asia. Those falling prices have made LNG a more attractive option for Europe on price, and many policymakers on the continent would like to see these imports increase dramatically in the coming years for the simple reason that, unlike Gazprom’s supplies, they don’t come with geopolitical strings attached.
America’s fledgling LNG export industry promises to keep the global market well-supplied for years to come—we’re currently sitting on a massive glut of shale gas that has depressed domestic prices to shockingly low levels. As more export terminals come online, and as more of these exports start departing said facilities, importers abroad are going to continue to enjoy a buyer’s market. Europe’s energy security is looking a lot better these days, in no small part thanks to American fracking.