American shale gas is, at long last, penetrating into Eastern Europe. Poland just purchased its first cargoes of U.S. liquified natural gas (LNG), an important milestone in Europe’s quest to reduce its dependence on Russian energy imports. Bloomberg reports:
Poland’s state-owned PGNiG SA bought a spot liquefied natural gas cargo from Cheniere Energy Inc.’s Sabine Pass plant for delivery in June to the nation’s Baltic Sea import terminal, the first such contract for Central and Eastern Europe, it said Thursday. No LNG has been shipped to northern Europe since Sabine Pass started exports more than a year ago. […]
The agreement is historic and “commercially attractive,” Polish Prime Minister Beata Szydlo said in an interview with TVP Info television on Thursday, without being more specific on pricing.
Europe has a gas problem, and America is helping to solve it. The continent has long relied on Russia for its natural gas supplies, and currently sources roughly a third of those hydrocarbons from Russian companies—predominantly Gazprom. That gas comes with conditions, though. Moscow has used contract terms and prices to coerce its European customers, offering cushy deals to countries it sees as friendly to the Kremlin’s interests, and hiking prices or, in the case of Ukraine, halting supplies altogether when a country crosses it.
For years, this seemed to be Europe’s fate, as the continent had few other options for overland pipeline suppliers to help it meet its natural gas demand. The advent of LNG changed that, however, by allowing any country with a port to import super-chilled natural gas on board ships from suppliers all around the world. After Russia’s annexation of Crimea, Europe began to accelerate its development of LNG import infrastructure as a way to help reduce its dependence on Gazprom.
Poland’s purchase suggests that LNG is capable of competing with Russian gas, but it won’t be a quick transition. As we noted earlier this week, Gazprom is confident of its position because it believes its supplies will remain cheaper than LNG alternatives (it’s expensive to liquify, ship, and re-gassify natural gas). But Warsaw clearly sees value in purchasing American gas, and that’s a step in the right direction for European energy security.