American Freedom LNG Competitive vs. Russian Gas

[ronwagn + 6,290]

https://oilprice.com/Latest-Energy-News/World-News/IEA-Head-LNG-Regulation-Helped-Europe-Save-8B-On-Russian-Gas-Imports.html

IEA Head: LNG, Regulation Helped Europe Save $8B On Russian Gas Imports

By Tsvetana Paraskova - Jun 07, 2019, 4:00 PM CDT

[Tom Kirkman + 8,860]

Interesting, I hadn't thought about the LNG challenge from quite this angle.  But competition is generally a good thing.

No, U.S. LNG will not be able to compete with cheaper Russian piped hydrocarbons, but it reduces Russia's hydrocarbon stranglehold on the EU by offering alternatives of LNG imports.  Especially handy for EU if Russia throws another temper tantrum and cuts off piped hydrocarbon supplies in pricing disputes.

[Jan van Eck + 7,558]

2 hours ago, Tom Kirkman said:

No, U.S. LNG will not be able to compete with cheaper Russian piped hydrocarbons

Sure it can.

First, remember that competition is not merely in price.  It is also in availability, and (as you point out) possibly an alternative in the case that Russia throws a "temper tantrum."  To that, I respond that Russia and Putin NEVER throw temper tantrums, everything he and they do is calculated to gain some advantage.  If you start with the concept that Russia is an existential threat to Europe, and an existing threat to Ukraine, then to deny Russia and by extension Putin himself the hard currency fruits of selling Russian gas and oil is to buttress your own physical security and cut off the funds flows for Russian fabrication of military weapons and the payroll of Russian mercenaries. Now, does that have a monetary value?  I would suggest it does.

Second, take the structure of marginal costing.  If the gas at the wellhead is being flared off, as some is, and instead as part of foreign-policy initiatives to thwart Russian expansionism the govt and the Western companies build pipe to liquefaction terminals to ship otherwise wasted gas to Poland, the cost of that gas now becomes only the additional fractional cost of liquefaction.  The gas itself is "free" in the sense that it was going to be flared anyway.  Then the delivered cost of gas into Poland is the liquefaction costs and the transport costs.  That is going to come in well below current Russian pricing. So even on a cash basis the West can undermine Russian territorial grabs against its neighbors. 

Where this becomes critical is in Estonia and Latvia. These are pushover targets by the Russian Army and have a major incentive to avoid becoming held helpless and captive to Russian land grabs forced by turning off the heat.  They are better off paying whatever it takes to get out from underneath being supplicants to Russian political pressures.  Yet the only way for this to work is for the US oilpatch to understand that they have a contribution to make both to developing their own profits and also Western markets (in the longer run) and Western freedom, because without that, you hve no markets later to sell to.  You cannot seriously think that Putin is not going to invade Eastern Ukraine and the Baltic States when he thinks it is opportune to do so. Because he will. 

So, end game, it does not matter if Russia offers the European nations gas for free.  As far as Europe is concerned, it might as well not exist.  Buying Russian gas is not going to bring Russia into the family of nations any more than buying North Korean coal is going to bring that country into civilization.  To think so is to indulge in fantasy. Europe has to suck it up and get off Russian supplies.  You don't hand the money to buy a gun to a street thug who wants it to go rob and kill you the next time you are in town. 

[Tomasz + 1,608]

Russia is most reliable and stable gas supplier  which never even at height of Cold War cut gas flows to Western Europe. You just should not steal gas as bankrupt Ukraine and everything will be fine.

Its gas is also about 40 % cheaper than democratic LNG from USA- you need something about 300 $ for 1.000 m3 to breakeven Russia breakeven is about 150 $ so thats huge difference. 

So not, US LNG is totally uncompetitive so you need a lot  more sanctions and blackmail to force vassals in Europe to consume your very expensive democratic gas because anyone a little bit reasonable will do this voluntarily and pay twice the same price as for Gazprom gas..

 

Edited July 5, 2019 by Tomasz

[Sebastian Meana + 278]

It has more sense to the US to sell gas to the Caribbean in a future than to Europe. A lot of the reasons of why the world works as it works now are more political than economical, Germany sees that Russia has more reasons to be Germany's ally in the future than the US. The main importer of gas and oil from Canada, Mexico and the USA will be Britain, Ireland, Central America and the Caribbean

By delivering cheap natural gas to central America and the Caribbean those countries can more easily develop with cheap energy, because sure, stable and credible institutions, property rights, and rule of law is important, but access to energy is also important, if those countries develop their population is not going to get out of those countries to go to the US, if there's less illegal immigrants, or immigrants in general that wanna go to the US, is easier for the USA to patrol their borders and it can have a higher internal stability. because let's be honest Central America and the Caribbean is closer to the us than Europe a country like Russia and china gaining power out there is more critical than to do it

Edited July 31, 2019 by Sebastian Meana